Beruflich Dokumente
Kultur Dokumente
Moyobamba-Iquitos Transmission
Line
Final Technical Due Diligence
Report
Contents
Page
Important Notice 4
Executive Summary 5
1 Introduction 19
1.1 Project Overview 19
1.2 Project Context 19
1.3 Project Description 19
1.4 Basis for the Report 21
1.5 Role of Arup 22
5 O&M Contract 65
7 Construction Cost 96
7.1 Total CapEx 96
7.2 EPC Price 96
7.3 Concessionaire Cost 102
Important Notice
This report was prepared by Arup Latin America S.A.U. (“Arup”) in its capacity as Independent
Technical Advisor to the lenders or bond investors pursuant to an Agreement dated December 18, 2014
with Isolux Corsán (“The Advisory Services Agreement”). The forward-looking projections, forecasts,
or statements are based upon interpretations or assessments of available information at the time of
writing. Actual events may differ from those assumed, and outcomes are subject to change. Findings
are time-sensitive and relevant only to current conditions at the time of writing. Factors influencing the
accuracy and completeness of the forward-looking statements may exist that are outside of the purview
or knowledge of those involved. Any recipient of this document (“Recipient”), by its acceptance or use
of this document, acknowledges the foregoing and agrees to release Arup from any liability, unless it
has executed Arup’s standard reliance letter in which case Recipient shall be subject to the limitations
of liability set forth in The Advisory Services Agreement.
In performing the services, Arup has received information from third parties and has relied upon the
reasonable assurances of third parties, but does not warrant or guarantee the accuracy of such
information. It is understood and agreed by the Recipient that advisory services contain reasonable
assumptions, estimates, and projections that may not be indicative of actual or future values or events,
and are therefore subject to substantial uncertainty. Future developments or events cannot be predicted
with certainty and may affect the estimates or projections provided, such that Arup does not specifically
guarantee or warrant any estimate, opinion, or projection. This report speaks only as of its date, and
Arup is under no obligation to update the report to address changes in facts or circumstances that
occur after such date that might materially affect the contents of the report or any of the conclusions
set forth therein. Arup will not in any circumstances be liable for (a) any loss of investment, loss of
contract, loss of production, loss of profits, loss of time, or loss of use, and/or (b) any consequential,
incidental, or indirect loss. Questions concerning the use of or reliance on this report should be directed
to Arup’s project director, Jorge Valenzuela, at:Jorge.Valenzuela@arup.com.
Executive Summary
This report is primarily based on information available as of November 30, 2015.
Arup’s summary opinion is that, from a technical point of view, the Moyobamba-
Iquitos Transmission Line (the “Project”) appears to be feasible and the Project
should be able to comply with the terms of the Concession Agreement (“CA”).
However, we note that the final design is not yet complete, as final construction
drawings will be produced throughout the construction phase. Arup opines that this
is consistent with industry practices.
Project Overview
The Government of Peru (the “Owner”), acting through the Ministry of Energy and
Mines., has entered into a design, build, finance, operate and maintain (DBFOM)
agreement with Líneas de Transmisión Peruanas S.A.C. (the “Concessionaire”) for
the procurement of the Project. The Project is the result of the development process
led by the Agencia de Promoción de la Inversión Privada, or ProInversión. The
Concessionaire is a wholly owned subsidiary of Isolux Corsán (“Isolux.”) The
concession term is 30 years after construction completion.
The Concessionaire’s compensation will be realized through annual payments
according to local regulation Ley 28832 based on the investment values of the Project.
This payment structure minimizes appropriations-related risk.
The Project consists of the construction of a new transmission line and associated
substations covering 588km at 220kV and 7.8km at 60kV. The Project will connect
the currently isolated electrical grid of Iquitos, located in the Amazon rainforest, to
the national electrical grid of Peru (Sistema Eléctronico Interconectado Nacional, or
SEIN). The majority of the construction will take place in remote regions of the
Amazon basin and Andes Mountains.
The Owner provided a referential design for bidding purposed, however the design
of the final routing of the 588km line is the responsibility of the Concessionaire. The
Concessionaire’s design optimizes on the Owner’s design by following the route of
the previously studied Right of Way (“ROW”) for the proposed Ferrocarril
Interoceánico Norte railroad project that would connect the cities of Yurimaguas and
Iquitos.
Figure 1 illustrates the Concessionaire’s Design alignment in comparison to the
Owner’s Referential Design.
1
Note that the power demand only necessitates the installation of one circuit. However, the towers
are designed to carry the load of two circuits and the permits and electrical designs are performed
considering two circuits so that it is possible to install an additional circuit in the future if it is
needed. The design complies with the CA.
2
Substation Moyobamba Nueva has not been built at the time of this report and is the responsibility
of another concessionaire.
to US$30 million for delays up to 150 days which is equal to the delay penalties
cap in the CA. Please refer to Section 4.3.7.2 for a detailed discussion.
• The technical criteria for achieving Provisional Acceptance and Final
Acceptance, as well as the commissioning and acceptance test procedures to
which the EPC Contractor must adhere are defined in the CA. These criteria and
procedures are standard for the industry.
• The EPC Contractor is responsible for Commissioning, the Power Line
Contractual Verification Tests (“Verification Tests”), and the Trial Operations
Period. The Concessionaire is responsible for producing the Operability Study
that must be presented to the Committee for Economical Operation of the
National Interconnected Power System (“COES”) for approval before connecting
the line to the SEIN. The Concessionaire is also responsible to pay for the
Inspector required to verify the Verification Tests and to pay for the service
performed by the EPC Contractor during the Trial Operations Period. In Arup’s
opinion, the responsibilities maintained by the Concessionaire represent risks of
cost overruns and schedule delay, and we recommend transferring these
responsibilities to the EPC Contractor.
• The EPC Contractor may subcontract the works, but maintains responsibility for
the works performed by subcontractors. This provision is in line with industry
standards.
• The EPC Agreement does not include clauses that required Concessionaire
approval of key subcontractors. Arup opines that industry best practices suggest
that any subcontractor performing at least 20% of the works should be approved
by the Concessionaire and be subject to the same principal clauses of EPC
Agreement that allow for the proper oversight and management directly by the
Concessionaire;
• The EPC security package should include sufficient liquid or semi-liquid
performance security, typically in the form of a performance bond, retainage,
letter of credit, reserve account or contingent equity. One method to measure the
adequacy of an EPC security package is to estimate the cost to replace the EPC
Contractor in the event of a default. Arup estimates the cost to replace the EPC
Contractor to be between US$78 and US$92 million (14-17% of the total EPC
Price). This estimate does not include financing costs and/or Lenders’ overhead
during the replacement period.
• The 25% limit of liability cap is consistent with other infrastructure projects in
the area; Arup opines that this cap seems appropriate from a technical point of
view.
• The EPC Agreement reviewed by Arup does not include inflation adjustments
during normal construction of the Project; and therefore, it was assumed that the
lump sum included inflation risk. The Concessionaire has indicated that this is an
error and that the remaining balance of work outstanding will be updated for
inflation throughout the construction phase. Arup recommends that this inflation
adjustment and its calculations is prescribed in the EPC Agreement.
• The Concessionaire has divided the soil profiles along the route into homogenous
classifications. In Arup’s opinion, based on the geotechnical investigation
performed, the defined soil classes are appropriate inputs to be considered for
foundation designs.
• The Concessionaire’s design considers the use of helicoidal stakes. Arup notes
that this foundation solution will reduce the weight of materials and equipment
that are needed to build the foundation and thus represent a positive impact on the
logistical challenges of building in remote areas.
• Arup has verified, via spot checks, that foundation loads for tower types IQT60
and IQSE (representative cases) included in the structural design documents are
consistent with the appropriate load cases in the foundation reports.
• At the time of Arup’s review, there was a limited area of about 25km where no
geotechnical information was available, the type of foundation assumed is a
shallow foundation fixed with anchors into fresh rock which is considered to be
optimistic at this stage due to the lack of specific information in these areas.
Detailed design should consider outcomes of further analysis.
• Furthermore, the type of foundation referenced above (zapata anclada suelo
sierra) requires additional considerations that could invalidate the viability of this
solution, such as the response to lateral loads, the possibility of buckling of tie
bars under soil compression, etc. These issues could be addressed while
maintaining a similar foundation type if the slender tie bars were replaced with:
a) a more robust member, such as micropiles, capable of carrying both tension
and compression or b) with traditional spread footings that are excavated deeper
until fresh rock is found and use overburden soils to resist tensile reactions. The
Concessionaire has provided Arup with the requested contingency design that can
be implemented in the event fresh rock is not found, and Arup opines that the
requested design (spread footings) appears reasonable.
Tower Design
• Arup’s high level review suggests that there are no critical issues with the
structural design of the towers. In general, the Concessionaire’s structural
configuration of the towers is reasonably optimized to economize steel weight
and constructability while maintaining the required structural strength and design
safety factors. The documentation provided seems to be in line with the level of
detail indicated in the scope of Annex 8 of the CA.
• The level of detail for the tower drawings reviewed to date are appropriate
according to the requirements of the CA at this stage; however, they will need to
be developed at a later stage (during construction) in order to be at the appropriate
level to submit to the fabricator; the fabricator will act as final detailer and will
produce the shop drawings. This approach is in line with industry best practices.
The drawings will need to include a legend clarifying the steel sections to be
provided in each location. The Concessionaire has sent Arup a sample drawing
whose level of detail appears to be satisfactory.
• Prior to submitting tower designs to the fabricator, Arup recommends that the
design documentation include the following:
implemented between the New Iquitos Substation and the Control Center in Lima.
This proposed back-up system is appropriate for the Project.
• The 220kV transmission line has been designed to accommodate the maximum
power rating of 195MVA, but the transformer rating at the new Iquitos substation
as prescribed by the CA is 165MVA under ONAF (Oil natural Air forced) cooling
condition. This means that the maximum transfer capacity of the transmission line
design up to 195MVA cannot be achieved on a continuous basis due to the power
constraint in the transformer. Arup notes that the design specification of the
transformer defined in the CA is not optimal, and recommends considering the
implementation of a higher capacity transformer. However, Arup notes that, while
the transformer cannot operate at 195MVA on continuous basis, the system will
still operate during brief periods above the 165MVA capacity rating meeting the
IEC 60076-7 loading guide for short period (hours only); the system should not
exceed this capacity on a regular basis. Isolux has confirmed the design will
maintain the transformer rating of 165MVA despite this recommendation, which
is in compliance with the CA.
• The 60kV double circuit transmission line between the new and existing Iquitos
substation has been designed to carry 150MVA. Each circuit is designed to carry
a nominal capacity of 75MVA; therefore, if one circuit fails or is under
maintenance, the required power rating of 150MVA (normal) cannot be
maintained. This means that the transmission between Moyobamba and the
existing Iquitos substation cannot be guaranteed at 150MVA. To adhere to
international best practices, it is recommended to increase the single circuit
capacity between the new and the existing Iquitos substation to 150MVA and thus
achieve an N-1contingency in the line. In Arup’s opinion, the CA does not clearly
indicate whether each circuit may be designed as 75MVA, as is the case in the
Concessionaire’s design, or if each circuit is not be designed to 150MVA. Isolux
has confirmed its position that it will maintain the design for 75MVA, which the
Concessionaire believes is in compliance with the CA.
• The control and protection rooms within the substations are not provided with
gaseous type automatic fire protection system. Therefore there is a risk of fire
damage to the critical equipment within the substations. Although it is not
explicitly required by the CA, industry best practices are to provide gaseous type
fire protection system within the control and protection rooms. Isolux has
confirmed that the system will comply with the CA, but will not be a gaseous
system.
• The Concessionaire’s design does not consider temperature and humidity climate
control within, control, protection and 13.8kV switchgear rooms of respective
substations. According to industry best practices, climate control should be
implemented in these spaces to reduce the likelihood of failures and abnormal
operations especially in tropical climates. Therefore, it is recommended these
rooms to be temperature and humidity controlled.
Construction Plan
• The Concessionaire’s transportation plan is generally well thought out and takes
into account the transportability by river according to estimated water depths by
month and land transportation of the various materials.
• Arup considers the elevation changes in the mountain regions to be significant. A
detailed construction plan should be developed for these regions especially in
consideration of cable pulling.
• In the floodplains national safety norms will have to be considered to ensure the
workers are protected in the presence of tropical vegetation and wildlife like
snakes and leeches.
the Conditions Precedent for which the Concessionaire is responsible could face
delays, which would delay the overall Project Schedule. While Arup notes that
the proposed Project Schedule leaves a buffer of three months between the
planned EPC Operations Start Date (49 months) and the CA Operations Start Date
(52 months), as stated in Section 4.3.7.2, the Base Case Delay Scenario assumes
that the EIA approval will not be obtained until early March. This delay will
reduce the float to approximately one month. This remaining buffer will help
mitigate the risks identified in this section, but it is not substantial.
• Further, as stated in Section 4.3.7.2, if the EPC Contractor takes the full 34-month
construction period to which it is entitled, the EPC Operations Start Date will
occur after the CA Operations Start date, subjecting the Concessionaire to
penalties. Therefore, it is recommended that the construction period defined in
the EPC Agreement be reduced to 31 months and the Concessionaire generate an
Acceleration Plan should one be needed.
• According to the Concessionaire, the procurement lead time after delivery of the
fabrication drawings for structural steel in the towers is eight months and the lead
time for foundations is five months. Arup notes these lead times will put the
structural steel fabrication on the critical path of the construction schedule and
delays in fabrication drawings could result in a delayed start date for critical path
activities. Such a delay would thus require construction acceleration to recover
the time lost.
• The presented engineering schedule complies with the deadlines defined in the
EPC Agreement and the CA.
• In terms of the construction schedule, Arup notes that additional teams may be
needed for foundation construction in the Iquitos section to ensure that foundation
construction is completed on time. Alternatively, the cable hanging sequence can
be adjusted at a later date if necessary to accommodate delays in construction in
this section. In response to this issue being raised by Arup, the Concessionaire
has provided a contingency schedule showing the adjusted total float in this
section assuming multiple work fronts which appears reasonable. Other potential
delay risks include impacts of the geotechnical study results, ROW acquisition,
permitting (including EIA) and the on-time completion of the Cobra
Transmission Line.
• In terms of equipment procurement, the CA establishes that major substation
equipment must arrive on site by 42 months after the CA Commencement. In the
Concessionaire’s schedule the longest lead items could be ready as early as April
2017 which is 12 months prior to the CA deadline. Arup believes this is
reasonable.
• The Preliminary Operations Plan does not explicitly include the Operability Study
Phase. However, the Site Acceptance Tests cover the scope of the Operability
Studies. The Operability Study is the responsibility of the Concessionaire, and its
approval is required to register with the COES before beginning Trial Operations.
As stated in the EPC Agreement Review, Arup opines that the Operability Study
should be the responsibility of the EPC Contractor.
• The Preliminary Operations Plan does not clearly include the Verification Tests,
which are necessary according to the CA; however, these tests are included in the
scope and lump-sum fee of the EPC Agreement.
• The Preliminary Operations Plan nomenclature should mirror the names and
phases for the actual Preliminary Operations Phase outlined in the CA, e.g.
“Operability Study” rather than “Site Acceptance Tests”, so that it is easier to
determine compliance of the Preliminary Operations Plan with the CA. This
would help clarify whether or not the Verification Tests are included in the scope
of works.
• The Concessionaire should coordinate with OSINGERMIN and COES to reduce
the period between the completions of the Verification Tests and the start of the
Trail Operations Period. Regular written communication and meetings is
recommended.
• The estimated budget for the Preliminary Operations Phase is US$10,355,000.
Arup opines the budget appears adequate with a large contingency of about 57%
to cover unforeseen complications.
• Arup recommends that SEIN simulations that correspond to the Commissioning
Test Phase conditions are included as part of the scope of the Operability Study.
• Commissioning Tests should be linked to studies that simulate the SEIN actions
in a variety of circumstances to avoid unforeseeable situations.
• The Commission Test Phase and the Power Line Contractual Verification Tests
(“Verification Tests”) should be carried out as two successive testing stages.
In regards to the Commercial Operations Phase:
• The scope of work for O&M is in line with Peruvian norms and, as such, is
sufficient to comply with the CA. The Concessionaire will hire the O&M
operator, PLENA, to offer management advisory for a management fee of
US$598,000 (~12% of the annual O&M budget), and will directly contract the
remaining works.
• Arup opines that the Concessionaire’s scope of work adequately accounts for the
challenges presented by the Project’s geographical isolation and lack of access
roads.
• Arup recommends that the Concessionaire reconsider the staffing plan proposed
for the Project; an additional Operations person will likely be needed.
• The Concessionaire’s total annual O&M budget of US$5.011 million, including
the PLENA management fee, is also considered reasonable.
• The direct costs plus PLENA’s management fee estimate of US$3.469 million
per year is within normal ranges for the type of service offered.
• Arup considers the contingency included in the annual budget for possible
penalties to be adequate, the performance bond of US$3 million performance
provided by the Concessionaire during operations is sufficient to cover a major
penalty event in a given year.
• It is recommended that a reserve account is maintained to cover potential major
penalty scenarios in a given year. In our opinion, it is reasonable that this reserve
could be the difference between the exceptional penalty amount (US$2.5 million
and the annual penalty budget (US$600,000).
1 Introduction
1.1 Project Overview
The Government of Peru (the “Owner”), acting through the Ministry of Energy and
Mines., has entered into a design, build, finance, operate and maintain (DBFOM)
agreement with Líneas de Transmisión Peruanas S.A.C. (the “Concessionaire”) for
the procurement of the Moyobamba-Iquitos Transmission Line (the “Project”). The
Project is the result of the development process led by the Agencia de Promoción de
la Inversión Privada, or ProInversión. The Concessionaire is a wholly owned
subsidiary of Isolux Corsán (“Isolux.”) The concession term is 30 years after
construction completion.
The engineering, procurement and construction (“EPC”) Contractor will be Isolux
Ingenieria S.A. Sucursal Peru.
Isolux will self-perform the Operations and Maintenance (“O&M”) of the Project.
Isolux will directly subcontract the O&M works and will also hire PLENA, a
subsidiary of Isolux, as management advisors.
The Concessionaire’s compensation will be realized through annual payments
according to local regulation Ley 2883 based on the investment values of the Project.
The Owner provided a referential design for bidding purposed, however the final
routing of the 588km line was the Concessionaire’s responsibility. The
Concessionaire’s design optimizes on the Owner’s design by following the route of
the previously studied Right of Way (“ROW”) for the proposed Ferrocarril
Interoceánico Norte railroad project that would connect the cities of Yurimaguas and
Iquitos.
Figure 2 illustrates the Concessionaire’s Design alignment in comparison to the
Owner’s Referential Design, while Table 1summarizes the main differences between
the Concessionaire’s Design and the Owner’s Referential Design.
Figure 2: Transmission Line Alignment
• A 2x60kV power transmission line linking the new substation Iquitos Nueva to
the existing substation Iquitos, with a minimum capacity of 150MVA. The line
will be double circuit 800MCM AAAC conductors with one shield wire (type
OPGW).
• Extension of two existing substations: Moyobamba Nueva 3
(220kV/138kV/22.9kV) and Iquitos (60kV).
• New 220/60/13.8kV substation Iquitos Nueva with capacity of 150/150/30MVA
complete with shunt reactors and Static Var Compensators (SVC).
• New 220kV Intermediate Substation completed with shunt and series
compensation.
Refer to Section 6 for more information on the design.
3
Substation Moyobamba Nueva has not been built at the time of this report and is the responsibility
of another Concessionaire.
• Isolux is also constructing new transmission lines in India and the United States
(U.S.). The India project involves the construction and O&M of 1,512km of
transmission lines (765kV-400kV) and five substations. The project was to
become operational by August 2015, but has been delayed by the local
government’s failure to acquire necessary ROW.
In the U.S., Isolux formed a joint venture with the Canadian Investment Fund and
Brookfield Asset Management to deliver seven new transmission lines to transport
power to the grid from wind farms located in the northeast and south of Texas. The
concession includes the construction and O&M of six substations and 605km of
345kV transmission lines. The project has been fully operational since January 29th,
2014.
Table 2 below summarizes Isolux’s portfolio of transmission line concession projects.
All of these projects were constructed and operated by companies affiliated with
Isolux.
Table 2: Isolux Corsán Transmission Line Experience
Country Client Type Extension Status
CPTE 500kV 181 km Operation
LXTE 500kV 508 km Operation
LMTE 500kV 683 km Operation
IENNE 500kV 720 km Operation
Brazil JTE 230kV 940 km Operation
LTTE 500kV 247 km Construction
LITE 500kV 563 km Construction.
Operation expected in
2016.
USA WETT (Wind 345kV 605 km Operation
Energy
Transmission
Texas)WETT
India SEUP 765kV-400kV 1.512 km Construction.
Operation expected
by August 2015.4
4
The Concessionaire informs that this project has been delayed 1 year due to right of way delays that
were the responsibility of the government.
2.1.5 Engineer
The Concessionaire has indicated that Getinsa will be the lead engineering firm for
the Project. Founded in 1984 in Spain, Getinsa has projects in over 20 countries. The
firm has experience taking linear infrastructure from feasibility studies through
design and construction to operation. The company’s experience in Peru includes
final design of 137km of roads in the La Libertad Region, and the feasibility study,
executive engineering and environmental impact studies for the Yurimaguas – Iquitos
railway (Ferrocarril Interoceánico). The railway follows the same route as the
Project.
Arup has been informed that the electrical engineer on the Project will be Tacta: a
Brazilian firm with experience advising on and designing transmission lines in Brazil
and across South America, including Peru. Tacta and Isolux previously collaborated
on several projects in Brazil including the Paracatu-Pirapora and Tucuruí-Vila do
Conde C3 transmission lines.
The Concessionaire has provided the following list of firms involved in the
engineering studies and designs completed to date, including Getinsa and Tacta.
Arup opines that Isolux, via PLENA, has sufficient experience as an operator of
transmission assets.
Isolux’s projects in the Brazilian Amazon (and elsewhere) to Peru, which should
help mitigate many of the risks associated with building transmission lines in
challenging terrain.
• The EPC Contractor has provided a list of potential subcontractors that may be
used on the Project, a portion of which has construction experience in Peru. Based
on interviews with the Concessionaire, Arup opines that the process for hiring
subcontractors appears reasonable.
• The Concessionaire has provided a list of potential suppliers that they are
considering for the transmission line, the substations and the replacements for the
substations. The list includes a number of internationally recognized firms, such
as Siemens, ABB and GE Energy. Arup has experience with a number of the
suppliers. All of those we have encountered are considered reasonable or better.
• The Concessionaire has confirmed that all products purchased are certified as in
compliance with the design standards specified in the CA. These design standards
are in line with best practices.
• 1 Circuit installed
• 2 circuits
Permits The Owner will make its best effort to obtain permits, licenses, 4.1
authorizations, concessions, easements, land rights and similar in
the event that the local government authority present an undue
delay of the provision of these items despite the
Concessionaire’s completing all necessary steps required by
applicable law.
Design
Construction
Procurement
Financing
O&M
Permitting Owner to make reasonable efforts to assist in the
Project permitting
Revenue Modality of contract is SGT (Guaranteed
Transmission System) revenues funded by user
payments per Peruvian Law 28832 according to a
formula based on predefined investment and
projected O&M costs.
Environmental Concessionaire to acquire environmental license
Social Concessionaire may resolve the contract if cost
overruns arising due to the Previa Consulta
exceed 15% of referential budget
Right of Way Owner to provide ROW and Concessionaire to
assume costs
Force Majeure Neither the Client nor the Contractor shall be
responsible for the failure to comply with one or
more of their obligations when such failure is
attributable to a force majeure event.
Change in Law Economic financial equilibrium of the contract to
be reestablished in the event a change in law
affects costs or net operating income by more than
5%
Contractor in a back to back manner; the performance guarantee for the equivalent
amount provided by the EPC Contractor is in the form of a corporate guarantee,
which is a less liquid form of security.
• Termination clauses are in line with industry standards.
however the Concessionaire will have the first right of refusal to implement the
proposed Reinforcement. The Reinforcement will be paid upon an established price
that will be paid to the Concessionaire via an increase in the Base Tariff according to
an established discount rate. If the Concessionaire declines its rights of first refusal,
the installation will be bid out to interested parties and the Concessionaire is obligated
to comply with the process.
According to the Concessionaire there are no Reinforcements currently planned and
Arup is not able to determine what kind of Reinforcements would be needed at this
time. The most likely Reinforcements that may be required could be equipment
installations in the either the Intermediate Substation or New Iquitos Substation.
According to the Concessionaire, the industry norm in Peru is that concessionaires
typically self-perform reinforcements. In the event that the Concessionaire elects to
install a Reinforcement, the Concessionaire will be responsible for financing the
incremental cost. Arup opines that all Reinforcements would need to meet the
performance specifications in the CA. Further, Arup suggests that language be
included in the CA that significant Reinforcements require lenders’ consent.
Second Circuit
During construction, the Concessionaire is only required to install one circuit in the
220kV transmission line; however, the CA establishes that the Concessionaire must
design the 220kV transmission line to carry two circuits and to acquire the necessary
right of way and permits to install 2 circuits. The CA states that the second circuit
shall be installed once it is included in the updated Peruvian Transmission Plan, and
that the causes to include the second circuit could include:
• The forecasted energy demand in Iquitos will require additional transmission
capacity; or
• Works begin on the Mazán hydroelectric project or other generation source in the
area of influence of the Project.
The installation of the second circuit will rely on the cooperation of the
Concessionaire through the contract procurement process.
Arup has not reviewed any information related to the installation of the second circuit.
Arup notes in general that at the time of installation of the second circuit, careful
planning of the installation will be necessary to address health and safety risks. In
addition, Arup opines that sections of cable that will need to be pulled by helicopter
may require planned service outages of the first circuit. In areas where cables can be
pulled by land, power outages may not be required.
Arup estimates that the total cost to procure and install the second circuit is ~US$60
– 70 million which is above the threshold of the maximum price for Reinforcements;
and therefore, it appears likely that the contract to construct, operate and maintain the
second circuit will be bid publicly.
3.7 Penalties
The CA specifies penalties per day of delay in reaching commercial operations
applied according to the following schedule:
• US$85,000 per day for the first 30 days of delay
• US$165,000 per day for the subsequent 30 days of delay
• US$250,000 per day for the subsequent 90 days of delay
In addition, the CA establishes a single penalty of US$2,000,000 per each of the
following occurrences:
• A governmental authority declares that the Concessionaire has improperly taken
advantage of its role in the energy transmission market
• Failure to comply or partial, delayed or defective completion of mandated
improvements (“Refuerzos”) to be made to the Project
• Additionally, if the if the Project experiences line outages or deficient
performance standards according the regulations provided by OSINGERMIN, the
corresponding penalties will be applied.
The delay penalty provisions and penalty cap has appropriately been passed down
to the EPC Contractor for the items controlled by the EPC Contractor.
The main relief events provided to the Concessionaire due to an Owner’s Default
include:
• A delay by over six months of the milestones established in Anexo 7 of the CA
caused by a governmental authority
• The extension of 18 months of the duration established in Article 24 of Decreto
Supremo No 001-2012-MC
• If the costs for the Consulta Previa established in Anexo 9 exceed 15% of the CA
investment amount
• A major breach of contract or obligations by the Owner
• The Owner’s denial of granting authority of electric transmission due to the
results of the previa consulta
Either the Concessionaire or the Owner may terminate the contract in the event of a
Force Majeure event impeding the Project for more than 12 continuous months. In
the event of the termination of the CA, the concession will be auctioned off
according to the value of the investment made in the Project and based on whether
the line is operational when termination occurs. The first auction price shall not be
inferior to the value of the concession assets. If a second auction is required, a
reduction of up to 25% of the value of the concession assets may be considered.
• A change in Law.
Schedule Relief EPC Contractor may request an extension to the construction 10.6
term due to the following events:
• Delay in licensing
In the event that the EPC Contractor terminates for any of the
reasons listed above other than a force majeure event, the
Concessionaire shall pay the EPC Contractor all sums due
plus an amount equal to 5% of the unexecuted works.
Relief Events Neither the Concessionaire nor the EPC Contractor will be held 14.1
responsible for non-compliance with their obligations of the EPC
Agreement when such non-compliances are a direct result of a
force majeure event.
The EPC Contract contains the appendices or “Anexos” A – H. The appendices are
summarized below:
Appendix A: Scope of the project, site description and technical specifications
of the Transmission Line.
In Anexo A the scope and general characteristics of the line are stated. This Appendix
restates certain language from the CA, but also defines criteria in addition to the CA.
For example, Appendix A states the line lengths for each subsection of the
transmission line and indicates the coordinates of each line vertex as well as the
expected ground conditions at that vertex. Arup notes that by defining the vertices of
the line and specific lengths, this could entitle the EPC Contractor to a claim if a
vertex is changed during construction. We recommend that the technical scope and
parameters in this appendix be back-to-back with the requirements of the CA, and
that the EPC Contractor only have the rights to produce a claim due to the causes
specified in the body of the EPC Agreement.
The appendix specifies technical criteria for equipment and civil works and includes
at the end a disclaimer that the final configuration, dimensions and characteristics of
the reactive compensation equipment will be defined by the EPC Contractor and
subject to the approval of the Pre-Operability Study by the Committee for Economical
Operation of the National Interconnected Power System (“COES”). Arup notes that
the Pre-Operability Study is not required to be approved by COES, but rather the
Operability Study. Arup suggests that this final disclaimer be changed to read that the
final configuration, dimensions and characteristics of all technical specifications of
the Project are subject to the EPC Contractor’s final design and subject to the approval
of the Owner and compliance with the CA.
Appendix B: Construction budget for EPC Contractor works and EPC
Contractor’s Offer
This section includes an illegible excerpt from a financial model that shows capital
expenditure (“CapEx”) investment over time and a high – level construction budget.
It is unclear to Arup how which values will be used and how to calculate escalation,
cost overruns, and physical progress of the Project (earned value). Arup notes that
both budgets are based on an outdated design and that the number of towers has
changed. Arup opines that it is important to have a clear understanding of how the
Project costs will be measured and tracked and recommends that an updated detailed
budget be agreed upon by the parties to be used during construction.
In addition, this section includes the list of replacement parts and equipment to be
purchased by the EPC Contractor. Arup notes that these parts and equipment should
be checked against the final design produced by the EPC Contractor to update the
requirements. Arup opines that changes in costs of the updated budget or replacement
parts and equipment should be considered under the EPC Agreement as design risk
passed to the EPC Contractor.
Appendix C: Construction Schedule
Appendix C shows a construction schedule. See Section 8 for commentary on the
Project Schedule.
Appendix D: Terms for the Supervision of the Project
Appendix D has been left blank stating it is pending the specifications of the
supervision contract and the specifications of Osingermin.
Appendix E: Appendices 1, 2, 5 and 8 of the CA
Appendix E includes the CA appendices for project specifications, verification
procedures, telecommunications and design requirements for the Project. Arup opines
that these appendices are relevant to the EPC Agreement to fulfill back to back
provisions; however, in Arup’s opinion the entire CA should be referenced in the
EPC Agreement as a binding document and not just the appendices attached to the
EPC Agreement.
Appendix F: Guarantees
Appendix F outline the conditions of the guarantees of the project. Arup notes that
his section is subject to the revised guarantee provisions in the EPC Addendum under
negotiation and recommends this appendix be review by legal counsel.
Appendix G: Right of Way Schedule
Appendix G is listed as pending the delivery of the ROW schedule to Osingermin.
Arup understands that this schedule has been delivered to Osingermin.
Appendix H: Verification tests schedule and protocols
Appendix H is pending input from the definitive schedule, supervision contract and
requirements of Osingermin.
potentially impact cost and schedule) being held by the Concessionaire. Consultation
with a legal advisor is recommended to determine inconsistencies between the CA
and the EPC Agreement.
associated with work stoppages not caused by the EPC Contractor, Force Majeure
events, inflation and change in law.
The graphic below illustrates the key milestones for the CA and EPC Agreement
schedules and reveals that there is a risk that delays in the EIA approval could prevent
the Project’s EPC Operations date from complying with the CA Operations Start
Date. As per the CA, the Concessionaire is entitled to a 22-month period between CA
Commencement (Commercial Close) and EIA Approval. As per the EPC Agreement,
the EPC Contractor is entitled to a construction term of 34 months plus one month of
trial operation from the date of EIA approval.
Figure 5 shows if the EIA approval takes the entire 22 month period allowed in the
CA, and the construction period extends for 34 months after the EIA Deadline, then
the Late EPC Operations Start Date will take place after the CA Operations Start Date
(the period between CA EIA Deadline and CA Operations Start Date is 30 months).
Our understanding is that the Concessionaire would be responsible for construction
delay penalties that would result from this hypothetical scenario. As described in
Section 8, the construction schedule appears adequate and delay risks can be
mitigated
CA
OPERATIONS
CA START DATE
COMMENCEMENT CA
ENGINEERING CA EIA
DEADLINE DEADLINE
EARLY EPC
EPC
OPERATIONS
ENGINEERING
START DATE
DEADLINE LATE EPC
OPERATIONS
EPC
START DATE
ENGINEERING
FINAL
DEADLINE
Early EPC Operations Start Date is calculated applying the EPC construction duration of 34 months
plus 30 days of Trial Operations, assuming the EIA is obtained in 12 months as planned in the EPC
Schedule.
Late EPC Operations Start Date is calculated applying the EPC construction duration of 34 months
plus 30 days of Trial Operations from the CA EIA Deadline established in the CA. The EIA is the
responsibility of the Concessionaire and is a condition precedent for the EPC Contractors 34 month
construction duration to begin.
The Concessionaire must approve the engineering and then issue a Notice to Proceed
(“NTP”) to officially begin the construction phase. It is not expected that the
Concessionaire will withhold either condition upon the successful completion of the
other conditions precedent outlined above.
Conditions Precedent to Commercial Operation Phase
The EPC Contractor is responsible to perform the Verification Tests and to prepare,
submit, and obtain approval for the final Verification Test Report. The approval of
the final Verification Test Report will mark the end of the 34 month contractual
construction study. Before beginning the Trial Operations Period, the Concessionaire
is responsible to register as a member with the COES. This registration involves the
production and approval of the Operability Study. While it is possible for the EPC
Contractor and Concessionaire to perform their respective obligations in parallel,
Arup highlights that becoming a member of the COES is a prior requirement to
connect the line to the SEIN and represents a risk of delay to starting the Trial
Operations Period if the Operability Study and subsequent approvals are delayed. To
account for this risk in our analysis, Arup assumes that there will be a one month
additional delay between the ending of the 34 month construction period and the
beginning of the one month Trial Operations Period.
Delay Scenario Results
The analysis below shows the amount of penalties to which Arup estimates that the
Concessionaire may be subject (and will not be reimbursed by the EPC Contractor)
under a variety of scenarios. Furthermore, the analysis compares the Commercial
Operations Start Date to the CA Long Stop Date for the scenarios considered.5 The
scenarios considered in this analysis are outlined below:
Base Case
For the Base Case analysis we assume the EPC Contractor uses the entire 34 month
construction period. We note that it is possible to accelerate construction as outlined
in Section 8. In addition the Base Case assumes:
• Owner to verify Definitive Engineering: January 19, 2016 approval;
• Approval of EIA: February 1, 2016;
• Project and Construction Licenses granted: 25 days after EIA approval;
• Obtain ROW: February 28, 2016;
• Additional one month of delay (between construction and Trial Operations
Period) related to the Concessionaire’s risk registering with the COES;
• Construction Start Date assumed to take place immediately after last Condition
Precedent (February 28, 2016)
5
Arup notes that the “cushion” between the Commercial Operations Start Date and the Long Stop
Date is the time frame comparable to the 10 months considered by the Lenders in their liquidated
damages calculation. See Appendix E for more commentary on the EPC Security Package Proposal
provided by Santander (the Liquidated Damages sub cap).
Pessimistic Scenarios
The following pessimistic scenarios represent the downside scenarios provided by the
Lenders’ Environmental and ROW Advisors. Construction Start is assumed to begin
after achieving the delayed Condition Precedent. Scenarios include:
• Approval of EIA: May 15, 2016;
• Obtain ROW: January 6, 2018;
The results of the analysis show that based on the current state of the outstanding
Conditions Precedent and the assumption that construction is not accelerated, the
Base Case scenario would result in approximately 24 days of delay in the
Commercial Operations Start Date representing approximately US$2 million in
delay penalties for the Concessionaire. Selected pessimistic scenarios show that this
value could reach US$17 million for a significant EIA delay, US$12 million for a
delay in the mobilization payment or a default in the most pessimistic scenario
presented by the Lenders’ Right of Way Consultant for the land acquisition for the
Intermediate Substation.
Arup notes that these values only consider the delay penalty costs and do not consider
other costs, notably the escalation that will be due to the EPC Contractor for a delay
in the commencement of the works.
Table 10: Conditions Precedent Delay Analysis
ROW Substation
Scenario Base Case EIA Delay Delay
Construction Start 2-Mar-16 15-May-16 6-Jan-18
Construction End 2-Jan-19 15-Mar-19 6-Nov-20
COES Registration delay 2-Feb-19 15-Apr-19 6-Dec-20
Commercial Operations Start Date 2-Mar-19 15-May-19 6-Jan-21
CA Commercial Operations Start Date 6-Feb-19 6-Feb-19 6-Feb-19
Commercial Operations Start Date Buffer/(Delay) in days (24) (98) (700)
Delay penalties (US$ million) $2.04 $17.0 $30
CA Long Stop Date 6-Jul-19 6-Jul-19 6-Jul-19
Long Stop Date Buffer/(Delay) in days 126 52 (550)
Long Stop Cushion (months) 5 2 N/A
See Section 8.1 for a discussion on the impacts of these delay scenarios on the
overall Project Schedule.
acceleration of works will be measured or enforced other than that the plan for
accelerating the works must be agreed upon between the parties.
The Concessionaire may request that the EPC Contractor accelerate the schedule if
the delay is less than 60 days. In this case, the Concessionaire will agree to reimburse
the EPC Contractor to the associated incremental costs.
Arup opines that it is possible to accelerate the schedule and measure the associated
incremental; however, international best practices suggest that the combination of
early works bonuses and penalties should be sufficient to properly incentivize the
EPC Contractor to minimize delays. The EPC Agreement includes delay penalties
states that a construction works early bonus payment may be negotiated between the
Concessionaire and the EPC Contractor.
4.4 Subcontractors
The EPC Agreement allows the EPC Contractor to subcontract the works, but the
EPC Contractor maintains responsibility for the works performed by subcontractors.
See Appendix Appendix B for a list of potential subcontractors, a portion of which
have experience in Peru.
However, the EPC Agreement does not include clauses that require Concessionaire
approval of key subcontractors. Arup opines that industry best practices suggest that
any subcontractor performing at least 20% of the works should be approved by the
Concessionaire and be subject to the same principal clauses of EPC Agreement that
allow for the proper oversight and management directly by the Concessionaire.
to approximately 15.5% of the EPC Price (. US$86 million). Thus, the total
amount is within the typical range.
• The payment application and supporting materials (including cash flow model
referenced above), is typically reviewed by the independent engineer (“IE”) and
the amount of payment is agreed to by the Concessionaire and EPC Contractor
prior to first disbursement. All advance payments are recommended to be backed
100% by a liquid security that can be amortized at the same rate as the advance
payment.
• The EPC Agreement specifies milestone payments for the procurement of
specified materials and equipment to be installed in the Project. The EPC
Contractor is entitled to milestone payments equal to 15% upon issuing the
purchase order, 75% upon the procurement item arriving at the port of origin for
imported goods or upon completion of fabrication for domestic items and 10%
upon the delivery of the procurement item to the job site. Arup opines that the
payment schedule appears reasonable and notes that the 15% upfront payments
should be backed by a liquid security. Note that this security could be provided
by the manufacturer.
• The EPC Agreement reviewed by Arup does not include inflation adjustments
during normal construction of the Project; and therefore, it was assumed that the
lump sum included inflation risk. The Concessionaire has indicated that this is an
error and that the remaining balance of work outstanding will be updated for
inflation throughout the construction phase. Arup recommends that this inflation
adjustment and its calculations is prescribed in the EPC agreement.
risk is assumed to be equal to 10% of the progress completed but not received at
time of default.
• Premium to find a new contractor: The risk and associated premium the Project
would have to pay in order to hire a replacement contractor will depend on local
market conditions at the time of default and availability of firms with adequate
capacity. It is expected that the need for immediate replacement and the
mobilization and overhead costs associated with the replacement will add to the
contract price. Our analysis considers a 20% premium applied to the cost of
remaining work during the Project.
• Delay risk: The process to remove the existing EPC Contractor and hire a new
one can impact the schedule. We assume that it will take five months to hire a
new contractor and an additional one month to mobilize due to the isolation of
the Project. Damages are based on the penalties issued by the Owner according
the CA. We have assumed that the time lost due to contractor replacement will be
recoverable when the Project is less than 25% percent complete.
Table 11 provides a summary of the quantified risks versus the security package in
place.
Table 11: Security Package Analysis for EPC Contractor Default Scenario (US$ million)
Percent Complete 0% 25% 50% 75% 100%
1. Payment Application 0.0 138.4 276.8 415.2 553.7
2. Work completed and received 0.0 51.4 193.3 377.3 553.7
3. Work completed but not received 0.0 87.0 83.6 38.0 0.0
4. Work to be completed 553.7 415.2 276.8 138.4 0.0
Risk
Latent defects in construction (a) 0.0 8.7 8.4 3.8 0.0
Premium for new contractor (b) 0.0 83.0 55.4 27.7 0.0
Delay Penalties I n/a n/a 15.0 22.5 30.0
Total risk 0.0 91.7 78.7 54.0 30.0
Risk as a % of EPC Price 17% 14% 10% 5%
Suggested Security Package 0.0 91.7 78.7 54.0 30.0
Notes:
(a) 10% of Work Completed but Not Received (assume 10% of EPC Agreement value)
(b) 20% of Work to be Completed
(c) Assume 0 – 5 months impact to schedule depending on when default occurs
5 O&M Contract
As discussed in Section 9.2, the Concessionaire plans to directly subcontract O&M
works and hire PLENA, a Brazilian company and subsidiary of Isolux that specializes
in the field, as a management advisor. As stated in Section 2.1.6, PLENA has
sufficient experience as an operator of transmission assets.
In the unlikely situation of a O&M Subcontractor replacement scenario, Arup
would expect additional costs to be incurred by the Concessionaire. These costs
would include both one-time costs and long-term increased costs. One-time costs
would mainly result from procuring a new O&M Subcontractor and include legal,
procurement and O&M mobilization expenses. These one-time costs would be
minimal in relation to the annual Project O&M budget, as the transmission sector in
Peru has a robust history of privatization of operations. In Arup’s opinion, suitable
replacement operators are available in the local market in the event of an O&M
Contractor default.
6.1.1 Methodology
This section of the report provides a high-level review of the Definitive Design
provided up to November 6th, 2015 and reflects supplemental discussions held
between Arup and the Concessionaire. The scope of this review covers the following
areas:
• Review of the geotechnical studies
• Review of the tower foundation design
• Review of the tower structure design
6.2.1 Overview
Arup considers the level of detail of the documents received to be reasonable. Arup
has some recommendations for further studies and analysis of the geotechnical
conditions in floodplains and on rock that will allow for more reliable foundation
design during the detailed design phase which will take place during construction.
These recommendations for limited locations are noted below.
At the time of this report, geotechnical investigations are continuing in approximately
25km of the route that are difficult to access. These studies will be ongoing through
Financial Close and during construction. This approach is in line with industry
standards. The risk of differing site conditions will be reduced once these studies are
completed. Note that as per Section 3, it is unclear whether these risks are held by the
Owner or the Concessionaire. The CA and the EPC Agreement do not specifically
address this issue. Arup believes this risk should belong to the EPC Contractor.
6.3.1 Overview
The Concessionaire has developed a variety of foundation designs, allowing for
adaptability as the geotechnical studies are finalized. Arup has reviewed the plans and
design specifications and calculation reports for the proposed tower foundation
designs. The information received is at various levels of detail and the final detailed
design will be developed in parallel with construction. In general, Arup considers the
proposed solutions to be reasonable, subject to the recommendations for elements to
be incorporated into the detailed design highlighted in the previous section. Arup
notes that the main foundation uncertainty concerns the designs for foundations with
anchors into fresh rock, since the geotechnical studies of these locations have not yet
been completed.
• Arup has verified, via spot checks, that foundation loads for tower types IQT60
and IQSE (representative cases) included in the structural design documents are
consistent with the appropriate load cases in the foundation reports;
• The Concessionaire’s design considers the use of helicoidal stakes. Arup notes
that this foundation solution will reduce the weight of materials and equipment
that are needed to build the foundation and thus represent a positive impact on the
logistical challenges of building in remote areas;
• At the time of Arup’s review, there was a limited area of about 25km where no
geotechnical information was available, the type of foundation assumed is a
shallow foundation fixed with anchors into fresh rock which is considered to be
optimistic at this stage due to the lack of specific information in these areas.
Detailed design should consider outcomes of further analysis;
• Furthermore, the type of foundation referenced above (zapata anclada suelo
sierra) requires additional considerations that could invalidate the viability of this
solution, such as the response to lateral loads, the possibility of buckling of tie
bars under soil compression, etc. These issues could be addressed while
maintaining a similar foundation type if the slender tie bars were replaced with:
a) a more robust member, such as micropiles, capable of carrying both tension
and compression or b) with traditional spread footings that are excavated deeper
until fresh rock is found and use overburden soils to resist tensile reactions. AS
requested, the Concessionaire has provided Arup with a contingency design that
can be implemented in the event fresh rock is not found. This design (spread
footings) appears reasonable;
• The short-term capacity calculation for piles (driven piles and piles with base
enlargements) in cohesive soils has not been considered in the Memorias de
Cálculo. Given the large factors of safety which are being used in these reports,
this omission does not seem to have an implication on the minimum size of the
piles required. Arup verified this specifically for Torre IQA30 suelo II-I Mo/Yu.
In any case, in order to assure that all critical cases are covered, the
Concessionaire should consider short-term verification for piles supported on
cohesive soils in the detailed design;
• Drawings “LTP-LTMI-ID-EM-PL-30” (5.1.7 Detalle de cruces de ríos) show
micropiles used as foundation support. Although this foundation type may be
appropriate, there is no information in relation to the design of this type of
foundation. We would expect information for this foundation to be included in
the detailed design produced during construction.
6.4.1 Overview
Arup has reviewed the plans and design specifications and calculation reports for the
proposed tower structures. The information received is at various levels of detail and
the final detailed design will be developed in parallel with construction. Arup’s high
level review suggests that there are no critical issues with the structural design of the
towers. The Project includes very tall and slender towers supporting long spans of
cables. The design calculations appear reasonable to justify the design.
The tower design contain the appropriate level of detail for the current phase of the
Project. Member cross section and connection details require further development
during the detailed design phase (which will continue through Financial Close and
during construction).
6.5.1 Overview
Arup performed a high level review of the line, substation and system electrical
design proposals submitted by the Concessionaire. The review compared and checked
the Concessionaire’s design against the requirements stipulated in the CA and general
industry standards and best practices. Arup reviewed a design in progress, and the
final design may be subject to change post-Financial Close, which is considered to be
in line with industry best practices. In general Arup finds that the electrical design is
reasonable and on tract for compliance with the conditions of the CA.
Description of Design
The Moyobamba to Iquitos Transmission line is a key infrastructure project in Peru
interconnecting National Grid (SEIN) of Peru to isolated power system in Iquitos
region.
Due to the significant length involved, both sections of the line are provided with
series capacitor compensation to improve the power transfer capability. In addition,
shunt reactors will be required to control the reactive power of the series capacitors
so that the transmission line can operate under minimum load condition. To be able
to control the voltage in a dynamic and continuous manner, the line will be provided
with static var compensation and synchronous compensation.
ground wires and the ground when a short circuit happens along the line. Arup notes
that this software is not an industry standard. Therefore, Arup recommends reviewing
the validation and accreditation process implemented for this software.
Based on the analysis the final temperature rise on OPGW and GW is within the limits
of their thermal capability. Thus, the selection of these components is reasonable and
meets the requirements of the CA.
Selection of Insulators
The Concessionaire has selected glass insulated with a creepage distance of
20mm/kV corresponding to the pollution level II IEC 60815. The CA specifies a
creepage distance of 25mm/kV subject to verification by the Concessionaire. The
environmental pollution level selected for the assessment is deemed reasonable, and
therefore, the creepage distance selected by the Concessionaire is adequate for the
design.
Arup notes that the Concessionaire’s design considers 20 insulators per string
selected for 220kV which is one less than the 21 insulators required by the CA. The
Concessionaire has confirmed they have modified the design to conform to the CA.
This approach is appropriate.
In addition to the above, the Concessionaire is required to assess the capacity of the
existing auxiliary systems such as low voltage alternating current (LVAC) and low
voltage direct current (LVDC) supplies and provide additional capacity as required.
Similarly any other works deemed necessary to be carried out for the required
extension shall form part of the Concessionaire provisions. At the time of Arup’s
review, the Concessionaire’s design did not include a detailed description of the
extension plan. It is expected that the Concessionaire will assess this capacity during
detailed design.
New Intermediate Substation 220kV
The new Intermediate Substation will be required to accommodate the series
compensation to the long transmission line. The substation shall be double busbar
configuration and completed with;
• One (01) cell coupling bar at 220 kV.
• Two (02) cell line in 220 kV lines to the existing Moyobamba substation (SE
Belaunde Terry) and New Iquitos substation.
• Two (02) capacitive series compensation systems in 220 kV lines to the
Moyobamba and New Iquitos to compensate 60% of the inductive reactance
of the lines.
• One (01) cell line reactor for 220 kV line to Moyobamba.
• A line reactor in 220 kV 60MVAr for the line to the Moyobamba
• Space for four (04) Future 220 kV cells.
The above provisions conform to the CA requirements. However, the CA specifies a
50MVAr reactor but based on the system studies, it has found that the 60MVAr is
required. The reactive compensation study carried out by the Concessionaire to reach
this determination seem to be in line with the industry standard practice for similar
designs.
New Iquitos substation 220/60kV
The proposed 220kV TL will terminate at the city of Iquitos at a new 220/60kV
substation which will link the exiting 60kV substation via a double circuit 60kV
transmission line. The substation will be a double busbar configuration on both
220kV and 60kV sides. The new Iquitos substation will be complete with;
220kV side:
• One (01) cell coupling bar at 220 kV.
• One (01) cell line for the 220 kV line to the Intermediate substation.
• One (01) cell line reactor for 220 kV line towards the Intermediate substation.
• A line reactor in 40MVAr for the line to the Intermediate substation.
• One (01) cell reactive compensation at 220 kV.
The Concessionaire has proposed the ‘Current Differential Protection’ in the Primary
protection relay which also has overcurrent / earth fault protection integral to it. Three
dedicated relays for overcurrent /earth fault protection have been provided on each
side of the transformer (primary & secondary and tertiary sides). Furthermore, other
protection functions such as ‘winding/ temperature’, ‘pressure relief’ have been
provided as required. The design is reasonable and in line with the specifications of
the CA.
Primary and secondary protection for Thryristor Controlled Reactors (“TCR”) at
Intermediate and Iquitos substations has been provided as required in the CA. The
scheme includes phase overcurrent, current differential and thermal overload
protection, as required. The design is reasonable and in line with the specifications of
the CA.
The Concessionaire’s design does not include protection schemes for the Static VAR
Compensator (SVC) at Iquitos New substation or Fixed Series Compensators (FSC)
at Intermediate substation. However, it is highlighted that the manufacturers of the
SVC and the FCS are required to provide protection for the SVC as required, and the
Concessionaire shall ensure such sub-systems conform to the CA.
The proposed protection schemes by the Concessionaire are reasonable and in line
with the specifications of the CA.
Busbar Protection at Substations (220kV & 60kV)
The CA does not contain a specific clause on busbar protection for substations;
however, the Concessionaire’s proposal for a typical ‘Current Differential Busbar
Protection’ and integrated ‘circuit breaker failure protection’ scheme with numerical
relays at each substation is considered suitable for this purpose. Therefore, Arup
opines that the busbar protection for substations is appropriate.
Substation Automation System (SAS)
The proposed levels of operation and control are as follows:
(Main control center – LIMA, back-up control center – New Iquitos SS)
The SAS has been proposed in accordance with the IEC 61850 as per the
requirements in the CA. At each substation, all the protection relays, are connected
to a switch. The Supervisory Control and Data Acquisition (SCADA) servers acquire
information from the protection relays using the IEC 61850.
The protocol used for SCADA communication between substations, and between the
Control Center in Lima and New Iquitos substation is IEC60870-5-104.
• If the line is energized through a circuit breaker without reactors and PIR, the
transient over voltage results in 2.54 p.u. in the middle of the line for the case of
phase-to-ground and 2.41 p.u. phase-to-phase. These values are higher than the
capacity of 220kV transmission lines normally rated at 2.3pu. This means that
that transmission line should be energized with the reactors connected with PIR.
• Recommendations have been given to avoid the resonance during the single and
three phase reclosing of the transmission line by having neutral earthing reactors
at each terminal of Moyobamba, Intermediate and new Iquitos substations.
• Evidence of ferroresonance has been detected during the energization of the
transformer at new Iquitos substation. To avoid ferroresonance during the
transformer energization, the series capacitors at the Intermediate substation have
to be placed in the by-pass mode. In addition, to reduce the inrush current and
limit the over voltage to value below 2pu during energization, the transformer
circuit breakers shall be equipped with a pre-insertion resistor ransmissionser. It
has also proposed to ensure that the transformer ac saturation reactance shall not
be less than 50%.
Arup cannot confirm the accuracy and the validity of the study results. However, the
study approach is appropriate for a project of this nature.
Reactive Compensation Study
The study has performed to identify the level of reactive compensation required at
the each of the substations, Moyobamba, Intermediate and new Iquitos to control the
voltage for the transmission line during various operating conditions including line
energization and no-load condition. Following the study, fixed shunt compensators
and variable compensations have been identified.
Based on the reactive compensation study, minor modifications have been made to
the compensation specified in the CA. The changes and recommendations include:
• The shunt compensators are: 20MVAr in Moyobamba (compared with 40MVAr
specified on the Concession Contract), 60MVAr in Intermediate (compared with
50MVAr specified on the Concession Contract) and 40MVAr in new Iquitos
substation.
• The shunt reactor at the Intermediate substation is to be inline and fixed, while
the reactors at Moyobamba and new Iquitos are to be inline and maneuverable
(switched on or off).
• It is recommended that the nominal power of the operating total variable
compensation operational in new Iquitos is + 85 / -75 MVAr. These compensation
value is higher than the values specified in the Concession Contact (+50/-
50MVAr) but it is believed that these higher values are necessary to meet the
conditions required under the CA.
Arup cannot confirm the accuracy and the validity of the study results. However, the
study approach is appropriate for the project of this nature.
6.7.1 Overview
Arup generally considers the proposed construction methodology to be reasonable.
The Concessionaire has demonstrated that they have analyzed the risks of building
in the diverse terrains of the project and is developing their construction plan
accordingly.
Figure 14: Location of work fronts, access rivers and work camps
Figure 15: Sample 12m wide forest clearance (Project will use 25m wide swathe)
reinforced with a layer of tree trunks or equipment and supplies may be transported
by barge on provisional canals.
Figure 17: Examples of provisional logistical routes
Construction methods between the Maranon River and the Tigre River are primarily
governed by the floodplains and soil conditions. Amphibious excavation equipment
will be required and construction will be performed from barges. The machinery for
placement of helicoidal and tubular piles will need to be stabilized using tree trunks
in shallow water, or attached to stabilizing legs in water deeper than 1.6m.
7 Construction Cost
The EPC Price included in the EPC Agreement is reasonable for this stage of the
Project’s design development. This opinion is based on: 1) comparison of EPC Price
versus relevant benchmarks and 2) comparison with Arup’s bottom-up EPC cost
benchmark.
6
EPC Cost for Trial Operations is equal to the quote received by the EPC Contractor to charge as a
lump sum price to include in the EPC Agreement as part of the EPC Addendum under review. Arup
opines that the Trial Operations cost should be included in the lump sum EPC Price.
The EPC Price for the Project is US$553.7 million. A breakdown of the main
construction items is shown in Table 16. As shown in the graphic, the procurement
and construction of the 220kV and 60kV transmission lines account for 82% of the
EPC Price.
Table 16: Breakdown of EPC Price (000s)
Item US$ % Total Cost Breakdown
Transmission Line $500,804,199 90%
Design $42,804,506 8%
Engineering $15,158,370 3%
Geotechnical $11,805,791 2%
Project
$15,840,346 3%
Management
Procurement $62,891,703 11%
Structures $31,768,431 6% Design 8%
Conductor Cable $16,802,653 3% Substations
Shield Wires $7,396,472 1% 10%
Procurement
Fiber Optic Cable $6,264,640 1% TL 11%
Insulators $592,859 0%
Fittings $66,649 0%
Construction $395,107,990 71%
Mobilization, Access Construction TL
Roads and Land $143,717,025 26% 71%
Clearing
Civil Works $204,827,172 37%
Erection $28,350,197 5%
Cable Winching and
$16,444,309 3%
Testing
Final Revision,
Testing and $1,769,288 0%
Servicing
Substations $52,855,323 10%
Total $553,659,522 100%
Arup performed two analyses in order to determine the adequacy of the EPC Price:
1) a comparison of the Project’s EPC Price with benchmark costs for similar projects
and 2) a bottom up analysis using Arup’s database of unit prices and quantities
derived from the Project design. This analysis focuses on the most important cost
items that comprise the EPC Price (69% of EPC Price): mobilization costs,
procurement of structural steel for towers and construction of foundations.
shows how the Project compares to similar projects in the region. Note that the scopes
of work for these projects include substations and transmission line costs.
Table 17: Total Cost per km of similar projects recently in the Amazon.
Voltage No. No. of New Length Cost per
Project
(kV) Circuits Substations (km) Km*
Moyobamba Iquitos 220 1 2 588 $941,600
Oriximina-Itacoatiara-Cariri (Manaus) 500 2 2 586 $1,133,00
Jurupari-Oriximina, 500 2 3 713 $390,000
Tucurui-Xingu, Xingu-Jurupari, 500 2 2 527 $905,000
*Costs adjusted for inflation and exchange rates
Arup separated out the transmission line from the substation costs for a more accurate
benchmark comparison. Figure 18 shows that the EPC Price per km is greater for the
Project than comparable projects in the Brazilian Amazon. One possible explanation
for the higher costs is the overall remoteness and inaccessibility of the Project. Similar
projects in Brazil are located along the Amazon River, at the interface between the
jungle and farmland, and therefore, are more easily accessible using existing roads.
Temporary access, provisional camps, and construction using helicopters and barges
contribute to the Project’s high construction cost per kilometer.
Figure 18: Cost per km in relation to total project length for similar projects in the Amazon
rainforest (Transmission line construction costs only)
In summary, Arup opines that the EPC Price is reasonable compared with
applicable benchmarks.
The Project includes seven different types of soil and, depending on the type of
transmission tower and soil type, four different types of foundations. See Section
6.3.2 for more detail.
Arup conducted a foundation analysis to determine 1) The total number of foundation
types per soil type and 2) the unit prices for each foundation type including materials
(concrete, reinforcement steel, anchorages, structural steel), production rates, labor
and equipment.
The following table summarizes the total number of foundations per foundation type.
Arup notes that the cost of each foundation type will vary based on the type of tower
installed.
Table 19: Distribution of Foundation Types
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There are seven different types of transmission towers, and within those types, there
are various unit prices that reflect the tower heights and location. Arup therefore
generated unit prices from a benchmark database for each tower type and height
combination. Note that the Concessionaire obtained different quotes for the supply of
steel for the transmission towers, so those prices were incorporated in Arup’s analysis
to compare both processes in a more accurate and realistic manner.
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scenarios) and added back the other direct costs (30% of total direct costs) provided
by the EPC Contractor. Arup then added back the 25% assumed for overhead and
profit to obtain the total Arup EPC cost benchmark range. Under the Pessimistic Case,
the total Arup EPC cost benchmark is US$495.0 million; under the Base Case
scenario, the total Arup EPC cost benchmark is US$471.2 million. Compared to the
EPC Price, the difference between the two benchmarks is US$58.7 million (11%) and
US$82.5 million (15%) respectively.
Table 21: Arup Cost Analysis Results
Scenario US $ million % Variance
EPC Price 553.7 0%
Arup opines that this difference range is within an acceptable range of accuracy. This
percentage is in line with industry standards for these types of projects and for the
level of details in the design achieved. Therefore, the EPC Price is considered
reasonable.
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Verification Tests and Trial Operations Period costs7). See Section 9 for a description
of these items and Table 25 for the costs of the individual line items.The
Concessionaire’s contingency of $5.9 million should be sufficient to absorb most
overruns.
Arup notes that the Concessionaire’s technical cost may also include cost overruns
for the EPC Price associated risks that have not been passed down to the EPC
Contractor. For example, in a downside scenario, the environmental licensing process
may cause a change in the length of the transmission line which would not be covered
by the lump-sum provisions in the EPC Agreement. According to the unit kilometer
prices established in the EPC Agreement, if the 220kV line length were to be
increased to the original reference design length of 631km, then the additional cost to
the Concessionaire would be approximately US$40 million.
Additionally, delays by the Concessionaire in achieving the Conditions Precedent can
result in additional penalties that will not be covered by the EPC Contractor. As
shown in Section 4.3.7.2 the Base Case additional fines related to a delay in the
Conditions Precedent is estimated to be US$2 million dollars with each day of
additional delay adding to the amount of potential delay cost up to in a worst case
scenario the US$30 million. Furthermore the delays in the start of construction will
entitle the EPC Contractor to increased escalation adjustments to the lump-sum EPC
Agreement.
Finally, Concessionaire costs include the O&M annual costs during Commercial
Operations. These are discussed in Section 9.2.2.
7
EPC Cost for Trial Operations (in Table 15) is equal to the quote received by the EPC Contractor to
charge as a lump sum price to include in the EPC Agreement as part of the EPC Addendum under
review. Arup opines that the Trial Operations cost should be included in the lump sum EPC Price.
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8 Project Schedule
Arup has received and reviewed the EPC Schedule (“Project Schedule”) containing
the Concessionaire’s Design engineering, procurement and construction schedules.
Arup believes these schedules to generally be reasonable; however this section does
identify potential sources of delay.
8.1 Overview
The EPC Schedule has a total duration of 49 months. The durations, start and end
dates of the key portions of the EPC Schedule are shown in Figure 20 and Table 22
below. According to our review, the EPC Schedule appears reasonable.
Figure 20: EPC Schedule Summary
However, while Arup notes that the proposed Project Schedule leaves a buffer of
three months between the planned EPC Operations Start Date (49 months) and the
CA Operations Start Date (52 months), as stated in Section 4.3.7.2, the Base Case
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Delay Scenario assumes that construction will not begin until early March. This delay
will reduce the float to approximately one month. This remaining buffer will help
mitigate the risks identified in this section, but it is not substantial.
Further, as stated in Section 4.3.7.2, if the EPC Contractor takes the full 34-month
construction period to which it is entitled, the Concessionaire will be subject to
penalties. Therefore, it is therefore recommended that the construction period defined
in the EPC Agreement be reduced to 31 months and the Concessionaire generate an
Acceleration Plan should one be needed.
In terms of the overview of other key schedule risks, we note that construction in
remote areas of the Amazon basin presents significant challenges to the Project, such
as lack of adequate modes of transportation for logistics support and potential
productivity losses due to rainstorms, especially during the months of December to
April. Other EPC-related Project Schedule risks include:
• Geotechnical risk (foundation design).
• Procurement of equipment (long lead times required for some items).
• Weather.
• Access to the site for construction crews.
• Difficult terrain (general construction risk in the Amazon and mountains).
Arup opines that the EPC Schedule generally accounts for and adequately manages
the risks. These mitigation measures are described in detail in Section 8.3.
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Moyobamba-Iquitos EPC
Moyobamba-Iquitos CA
Tucurui-Xingu, Xingu-Jurupari
Jurupari-Oriximina, Jurupari-Laranjal-Macapa
Oriximina-Itacoatiara-Cariri
0 10 20 30 40 50 60
Months
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delay risks. Arup also notes that construction can generally be accelerated, if need be,
by adding work fronts and making plans to start subsequent works early in the event
that the float preceding them is not fully used.
• Geotechnical risk: As stated in Section 4.3.1, the CA and EPC Agreement are
not clear regarding who bears cost and schedule risk related to site and/or
geotechnical conditions. A complete geotechnical study for the Project is
underway, but will not be complete until the detailed engineering phase (during
construction). While this is in line with industry standards, the results of this study
could impact Project costs and schedule. Arup also notes that the portion of the
Project that has been subject to the least amount of geotechnical investigation,
and consequently represents the greatest risk of foundation redesign, is the
Moyobamba section through the mountains. Arup notes that this section is not on
the critical path of the Project and, therefore, has some ability to cope with delays.
However, sections such as Moyobamba that need to be accessed by helicopter
have a limited window of available dates due to the annual climate cycle.
Therefore, it is important that these sections are ready to be begin works during
the dry season, which begins in June. Arup recommends that future studies take
this into account.
• Right of Way: This risk is held by the Concessionaire. Lenders’ ROW Advisor
reports that the majority of the ROW has already been obtained; however, they
also report that potentially serious delays may occur for the right of way
acquisition of the land necessary for the Intermediate Substation. Arup notes that
the possibility of working on different sections of the Project simultaneously
allows for works to begin before the ROW has been finalized; however, a
condition precedent for the EPC Contractor to begin works is receiving 100% of
the land required for the substations. Arup recommends consulting with the
Lenders’ ROW Consultant for this risk.
• Permitting: As stated in Section 4.1, the Concessionaire is at risk for obtaining
the majority of required permits, including the EIA and ROW. The Lenders’
Environmental Advisor reports that the EIA has not yet been approved and that
the Concessionaire is in the final stages of resolving observations. We recommend
consultation with the Lenders’ Environmental Advisor for further assessment of
the risk related to environmental and social permits According to the
Concessionaire project and construction licenses are only needed for non-federal
lands in the urban areas that correspond to the substation construction. The
transmission line is to be constructed on federal land and, therefore, does not
require this license. The other key permit required by the government prior to the
initial disbursement is the Certificate of conformity of the Pre-Operability Study
for the Project issued by COES). See Section 4.3.3 for more details.
• Cobra Transmission Line: The construction of this transmission line needs to
be completed before the Project can be operational, and the New Moyobamba
substation needs to be completed in time for Isolux to perform construction works
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http://www.osinergmin.gob.pe/seccion/centro_documental/electricidad/Documentos/PROYECTOS
%20GFE/Transmisi%C3%B3n/3%20LT_Construccion_Set_2015.pdf
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Iquitos has the greatest risk of delays that could impact the Project completion date,
however there are opportunities to adapt the schedule at a later date to mitigate against
this if necessary, including constructing foundations in parallel at multiple secondary
camps, or altering the sequence of the locations for the cable installation. The
Concessionaire has provided Arup with a contingency schedule that shows multiple
work fronts in the Iquitos section which increases the total float of this line and
reduces the risk of delays.
Mobilization
Access Roads
Tower Erection
Cable Pulling
Testing
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delays in fabrication drawings could result in a delayed start date for critical path
activities. Such a delay would thus require construction acceleration to recover
the time lost.
• The duration of the CA Schedule is reasonable in relation to other similar projects
through similar terrain. As stated above and in Section 4.3.7.2, the Base Case
Delay Scenario assumes that due to delays in the Conditions Precedent, including
an EIA approval, the Project Schedule will be approximately 51 months.
• The presented engineering schedule complies with the deadlines defined in the
EPC Agreement and the CA.
• In terms of equipment procurement, the CA establishes that major substation
equipment must arrive on site by 42 months after the CA Commencement. In the
Concessionaire’s schedule the longest lead items could be ready as early as April
2017 which is 12 months prior to the CA deadline. Arup believes this is
reasonable.
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the responsibility of the Concessionaire. As stated previously, Arup opines that the
EPC Contractor should be responsible for hiring the Inspector.
Trial Operations Period (“Período de Operación Experimental”)
The Trial Operations Period begins after the Verification Tests are approved and after
the COES approves the transmission line for connection to the SEIN under the
Commissioning Test Period. This phase consists of the uninterrupted operation, as
well as a series of tests, of the transmission line for 30 days. If the Trial Operations
Period is interrupted for more than 5 days, the timeline will reset. If the interruptions
are caused by the engineering, quality of materials or equipment, or quality of
construction attributable to the Concessionaire, the Trial period can be suspended.
If the phase is concluded without interruptions, the Concessionaire and the
OSINERGMIN will sign an accord to begin commercial operations of the Project.
The first payment for transmission services will also begin with the signing of this
act. Contractually the Trial Operations Period is the responsibility of the EPC
Contractor.
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9
In the latest draft of the EPC Agreement amendment, the cost of the Trial Operations Period is
included as an additional lump sum in the EPC Agreement. See Appendix D for review of EPC
Agreement amendment.
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In regards to the Operability Study phase as per the CA (or the Site Acceptance
Tests as per the Preliminary Operations Plan:
• Arup recommends that SEIN simulations that correspond to the Commissioning
Test Phase conditions are included as part of the scope of the Operability Study.
• As stated earlier, Arup opines that the Pre-Operability and Operability Studies
should be included in the EPC Contractor scope of work rather than be the
responsibility of the Concessionaire.
In regards to the Commissioning Tests phase as per the CA or the Powering Tests as
per the Preliminary Operations Plan:
• The testing should be linked to studies that simulate the SEIN actions in a variety
of circumstances to avoid unforeseeable situations. This is particularly important
given the Project involves is a long transmission line that connects to the
relatively weak generation in the north of the SEIN and depends on other Owner’s
installations.
• The Concessionaire should obtain a Certificate of Integration of the Transmission
Installations in the SEIN (“Certificado de la Integración de las Instalaciones de
Transmisión en el SEIN”), which includes further testing for approval.
In regards to Verification Tests:
• The Commission Test Phase and the Verification Tests be carried out as two
successive testing stages.
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• Preventative maintenance
• Corrective maintenance
• Emergency maintenance
• Operations
PLENA’s scope of work for O&M is in line with Peruvian norms and, as such, is
sufficient to comply with the CA. The proposal describes the principal classes of
equipment, the frequency and condition of services, a description of principal
activities, and verification of proactive maintenance, monitoring and corrective works
in the installations. The scope of work also includes the following:
• Line Maintenance: visual, ground based inspections, detailed inspections of
towers, management of third parties hired to clear vegetation and maintain the
access roads
• System Operation: creation of operating reports addressing normal conditions
and including contingencies, inspections and minor repairs,, technical and safety
meetings, inspection and maintenance of vehicles, operational tests,
administrative tasks, recording of outputs and abnormal occurrences, budgeting,
substation operations.
Arup opines that the Concessionaire’s scope of work adequately accounts for the
challenges presented by the Project’s geographical isolation and lack of access
roads. Some of the typical risks and mitigation measures for the O&M phase of this
project include:
• Helicopters will likely be necessary to access remote towers, representing
additional cost over normal transmission line O&M costs, and requiring
additional health and safety planning. This cost is included in PLENA’s budget.
• Based on the geography and the line height, the line is prone to frequent lightning
strikes. This is mitigated for in the electrical design of the towers.
• The jungle environment causes higher vegetation clearing efforts. These are
accounted for in the O&M budget.
• There is a risk of tall trees falling on the line, so tall trees adjacent to the line
should be monitored so that they can be removed if they die before they fall.
Commercial Operations Staffing Plan
The table below summarizes the Staffing Plan included in the O&M Plan:
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Arup recommends that PLENA reconsider the staffing proposed plan for the
Project, to be able to cover all shifts. In particular, Arup notes that an additional
Operations Engineer will likely act as a COES contact for O&M coordination, when
not covered in real time by COT specialists. COT specialists will be located in Lima
and will require two operators per shift, 6 total staff for three 8-hour shifts. The plan
only includes 5 operators and 1 Operations specialist. When considering breaks and
illnesses, an additional Operations person will likely be needed.
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shown in the table below. This does not include the initial O&M investment of
US$2,090,000 and the one-month Trial Operations expense (Concessionaire support
during Trial Operations Period) of US$367,593.
Table 27: O&M Annual Cost Breakdown
Item Cost (US$’000/year)
Direct Cost 2,871
Salaries 1211
Camps 487
Vegetation clearing and access road maintenance 122
Vehicles 155
Air inspections 88
Training 79
Communications 44
PLENA Management Costs 598
Replacement Parts 114
Concessionaire General Expenses 827
Personnel and vehicles 316
Offices 123
Advisors 105
Travel expenses 21
Environmental Monitoring 262
Annual O&M Budget (Subtotal) 4,411
Contingency for Penalties (0.8% of income) [approximate value] 600
Total [approximate] 5,011
Arup reviewed benchmarks from the Peruvian Energy network (Red de Energia del
Peru S.A.) for the payment of penalties for service interruption under the Technical
Norms for Quality of Electric Service (la Norma Técnica de Calidad de los Servicios
Eléctricos (NTCSE)). Arup concludes the Concessionaire’s approximate budget of
US$600,000 per year (Contingencies for penalties) is conservative and sufficient to
cover likely penalties. Lightning strikes and equipment failures are the most likely
cause of line outages.
In rare occasions, major penalties may exceed the annual contingency amount set
aside. As per the CA, the Concessionaire is required to maintain a US$3 million
performance bond during operations. Arup opines that this security should be
sufficient to cover major penalties in a given year. A study of Peruvian concessions
demonstrated that a major equipment failure, such as a transformer failure, could
result in a penalty in excess of US$2.5 million.
We note that major maintenance and replacement accounts for less than 10% of the
annual O&M budget; therefore a reserve account for this purpose does not appear
necessary. However, it is recommended that a reserve account is maintained to cover
potential major penalty scenarios in a given year. In our opinion, it is reasonable that
this reserve could be the difference between the exceptional penalty amount (US$2.5
million and the annual penalty budget (US$600,000).
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Glossary
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A1 Glossary
Term Definition
AAAC All Aluminum Alloy Conductor
ACAR Aluminum Conductor, Alloy Reinforced
ACSR Aluminum Conductor, Steel Reinforced
Anegado Seco Floodplain with no standing water (foundation condition)
Anegado Sumergido Floodplain with standing water (foundation condition)
ASTM American Society for Testing and Materials
CA Concession Agreement
CapEx Capital Expenditures
CIRA Certificate of non-existence of archaeological remains
(Certificado de Inexistencia de Restos Arqueológicos)
Concessionaire Líneas de Transmisión Peruanas SAC
DBFOM Design, Build, Finance, Operate and Maintain
EIA Environmental Impact Assessment
EPC Engineering, Procurement and Construction
Lenders’ Walsh
Environmental
Advisor
Lenders’ Right of Allpa Mapping
Way Advisor
MVA Megavolt Ampere
O&M Operations and Maintenance
OPGW Optical Ground Wire
OSINERGMIN Organismo Supervisor de la Inversión en Energía y
Minería
Owner The Government of Peru
ProInversion Agencia de Promoción de la Inversión Privada
Project The Moyobamba-Iquitos Transmission Line
ROW Right of Way
Seco Dry land (foundation condition)
SE Substation (Subestación)
SEIN National Electric Grid of Peru (Sistema Eléctrico
Interconectado Nacional)
SGT Guaranteed Transmission System (Sistema Garantizado
de Transmisión)
SVC Static VAR Compensator
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Potential Subcontractors
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B1 Potential Subcontractors
Experience Experience
Subcontractor Country
in Peru with Isolux
Foundations
Peru (Portuguese parent
x x
MOTA ENGIL company)
KELLER Peru (Spanish parent company) x x
TERRATEST Peru (Spanish parent company) x x
CORPESA Peru x
GEOTECNICA S.A.C. Peru x
CONSTRUCTORA RIO
x
HUALLAGA Peru
SERGEPIN Peru x
EDEMSA Colombia
ORDOCOL Colombia
GRUPO UNION Colombia x
BENAPAR OBRAS DE
x
INFRAESTRUCTURA (COGELTA) Brazil
COSTA FORTUNA ENGENHARIA
x
DE FUNDAÇÕES Brazil
GEOFORTE Brazil x
TLL Brazil x
GRAÑA Y MONTERO Peru x
SETPERBOL Peru x
PREIMACU Peru x
Tower Erection and Cable
Hanging
GRAÑA Y MONTERO Peru x
EDEMSA Colombia
ORDOCOL Colombia
GRUPO UNION Colombia x
BENAPAR OBRAS DE
x
INFRAESTRUCTURA (COGELTA) Brazil
TLL Brazil x
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Suppliers
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C1 Substation Suppliers
Suppliers Country or Region Reputation
INTERRUPTORES (Circuit Breakers)
ABB SWITZERLAND Excellent
SIEMENS GERMANY Excellent
ALSTOM FRANCE Excellent
CHINT CHINA Reasonable
SIEYUAN CHINA
SHANDONG-TAIKAI CHINA
CGL INDIA Good
SECCIONADOR (Disconnector)
ABB SWITZERLAND Excellent
SIEMENS GERMANY Excellent
ALSTOM FRANCE Excellent
HAPAM NETHERLANDS Excellent
MESA (SCHNEIDER) FRANCE Excellent
COELME ITALY Very good
SDCEM FRANCE Very good
CHINT CHINA Reasonable
SIEYUAN CHINA
CGL INDIA Good
EMEK TURKEY Good
TRANSFORMADOR DE CORRIENTE Y TENSION (CT/VT)
ABB SWITZERLAND Excellent
SIEMENS GERMANY Excellent
ALSTOM FRANCE Excellent
PFIFFNER SWITZERLAND Excellent
EMEK TURKEY Good
CGL INDIA Good
ARTECHE SPAIN Very good
TBEA CHINA
CHINT CHINA Reasonable
TRANSFORMADOR DE POTENCIA (Power Transformer)
ABB SWITZERLAND Excellent
SIEMENS GERMANY Excellent
ALSTOM FRANCE Excellent
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TBEA CHINA
LS SOUTH COREA
CGL INDIA Excellent
HYOSUNG SOUTH COREA Excellent
HYUNDAI SOUTH COREA Excellent
CHINT CHINA Reasonable
HITACHI JAPAN Good
TAMINI ITALY
TOSHIBA JAPAN Excellent
EMCO INDIA
VOLTRAN WEG BRASIL
GE - XIAN CHINA
PARARRAYOS (Surge Arrestors)
ABB SWITZERLAND Excellent
SIEMENS GERMANY Excellent
ALSTOM FRANCE Excellent
CHINT CHINA Reasonable
TRIDELTA GERMANY
BOWTHORPE UK
CGL INDIA Good
REACTORES DE POTENCIA (Reactors)
ABB SWITZERLAND Excellent
SIEMENS GERMANY Excellent
ALSTOM FRANCE Excellent
TBEA CHINA
CGL INDIA Excellent
HYOSUNG SOUTH COREA Excellent
HYUNDAI SOUTH COREA Excellent
CHINT CHINA Reasonable
HITACHI JAPAN Good
TAMINI ITALY
TOSHIBA JAPAN Excellent
EMCO INDIA
VOLTRAN WEG BRASIL
GE - XIAN CHINA
EQUIPOS SVC (SVC Equipment)
ABB SWITZERLAND Excellent
SIEMENS GERMANY Excellent
ALSTOM FRANCE Excellent
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JEMA JAPAN
HYOSUNG SOUTH COREA Very good
NR Electric China CHINA Good
SHANDONG-TAIKAI CHINA
CONDENSADORES EN SERIE (Series
Capacitors)
NR Electric China CHINA Good
ABB SWITZERLAND Excellent
SIEMENS GERMANY Excellent
ALSTOM FRANCE Excellent
GE - XIAN CHINA
ARTECHE SPAIN Very good
CEPRI CHINA CHINA Good
MOTORES SINCRONOS (Synchronous
condensors)
WEG BRASIL
ABB SWITZERLAND Excellent
SIEMENS GERMANY Excellent
ALSTOM FRANCE Excellent
GE USA Excellent
INDAR (INGETEAM) SPAIN
HYUNDAI SOUTH COREA Very good
TOSHIBA JAPAN Excellent
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SEDIVER Brasil
LAPP INSULATORS GMBH Germany Excellent
CHINT ELECTRIC China Good
MACLEAN POWER SYSTEMS Francia Good
YAMUNA POWER & INFRASTRUCTURE
LTD. India
PORCELANAS INDUSTRIALES, S.A. España very good
ZHENGZHOU ORIENT POWER CO., LTD China
ELECTROVIDRO S.A – RIO DE JANEIRO Brasil
REPRESENTANTE
GLOBAL INSULATOR GROUP HOLDING Estonia Good
SGD LA GRANJA S.L España
CTC POWER EQUIPMENT China
NGK INSULATORS, LTD. Japón Excellent
POMANIQUE ELECTRIC CO.,LTD. China
PFISTERER | UPRESA España Excellent
CTC INSULATOR CO., LTD. China
CERALEP Francia Excellent
CONDUCTOR & OPGW
ABENCOR SUMINISTROS SA Spain
Tanzania, united
ACHELIS (TANGANIYIKA) LIMITED republic of
ADEA POWER CONSULTING PTY LTD Australia
AFL TELECOMUNICATIONS EUROPE LTD United kingdom
ALUBAR CABOS S.A. Brazil
APAR INDUSTRIES LIMITED India
Tanzania, united
BAHDELA COMPANY LIMITED republic of
CHINA NATIONAL CABLE ENGINEERING C China Very good
CONDUCTORES MEXICANOS ELECTRICOS
SA Mexico
CONDUCTORES MONTERREY SA DE CV Mexico
DIAMOND POWER INFRASTRUCTURE
LIMIT India
DP INTER.SALES CONS. & DEVELOP. INC United states
ECN CABLE GROUP, S.L. Spain
ELSEWEDY CABLES EGYPT Egypt
GALAXY TRANSMISSION PVT. LTD. India
GRUPO GENERAL CABLE SISTEMAS SLU Spain Excellent
GULF CABLE & ELECTRICAL INDUSTRIES Kuwait Good
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* EPC Cost for Trial Operations is equal to the quote received by the EPC Contractor to charge as a lump sum price to include in the EPC Agreement as part of the EPC
Addendum under review. Arup opines that the Trial Operations cost should be included in the lump sum EPC Price.
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10
References to the EPC Contract are to the October 30, 2015 draft of the Contrato llave en mano between Líneas de Transmisión Peruanas (the “Owner”) and
Isolux Ingeniería S.A. Sucursal Peru (the “Contractor”) prepared by Miranda & Amado.
11
Lender comments and responses provided to Isolux on November 9, 2015.
12
Sponsor comments provided to the Lenders on December 23, 2015.
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No. Topic Current treatment10 Lender Responses11 Sponsor Comments12 Lender Responses Arup Responses
(including debt service) line to the Charhuaquero – COSTS ONLY) are estimated to
during a delay; (d) the Moyobamba project. be $427,996, including $60,403
technical criteria for for administrative costs during
achieving Provisional Owner’s costs during a delay are the construction period and
Acceptance and Final usually expressed as a “run rate”, $357,593 for one month of
Acceptance, and the by week of delay, or month of operations staff on site.
commissioning and delay.
acceptance test (d) See Section 4.2 in Report:
procedures; (e) the The technical criteria for
suitability of the defects achieving Provisional
warranty and the defects Acceptance and Final
liability period; (f) the Acceptance, as well as the
appropriateness of the commissioning and acceptance
project schedule and the test procedures to which the
completion date; (g) the EPC Contractor must adhere are
appropriateness of the defined in the CA. These criteria
contract price and the and procedures are standard for
payment schedule; (h) the the industry.
scope and content of the
technical annexes to the (e) See Section 4.6.1 for
EPC Contract; and (i) the summary opinion. In our view,
connection of the the warranty package, in our
transmission line to the opinion, is not sufficient.
Charhuaquero –
Moyobamba project. (h) See Section [x] for review.
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2. Subcontr The Contractor may As previously discussed and The Sponsors agree to (a) OK, the definition of (b)
actors subcontract the Works to notwithstanding that the comment in footnote 1 Subcontractor in the EPC
third parties, ensuring Contractor may be below. Contract will be amended
(§3.1) that they comply with the ultimately responsible for so that it covers entities that
standards set forth in the the performance of the supply equipment and
EPC Contract and Works, the Lenders would materials (not only those
Applicable Laws, typically expect that that perform services).
provided that (i) it may subcontracts above a certain
not subcontract the value be entered into with
entirety of the Works and subcontractors approved by Provided that a list of (c) A 20% threshold would be Arup opines that industry best
(ii) each subcontract the Owner (either pre- potential subcontractors is extremely high in the practices suggest that any
contains certain approved or submitted by the EPC Lenders’ view, particularly subcontractor performing at least
minimum requirements contemporaneous approval) Contractor and pre-approved in light of the contract price 20% of the works should be
(waiver of claims against and as such proposed that a by the Lenders, the Sponsor (i.e., subcontracts in an approved by the Concessionaire
the Owner and Lenders, “Major Subcontract” agree to consider the amount of up to $110 and be subject to the same
proportional insurance concept be included in the Subcontracts for an amount million would not require principal clauses of EPC
and confidentiality EPC Contract. In the in excess of 20% of the EPC Owner approval). Agreement that allow for the
requirements and terms absence of such a Contract as Major proper oversight and
generally consistent with mechanism the Owner (and Subcontractors. The EPC The proposed list of management directly by the
the EPC Contract). thus the Lenders) would not Contractor delivered to subcontractors and Concessionaire.
have a means of regulating Independent Enginner the threshold remains subject to
the Subcontractors13 that list of potential Major the Independent Engineer’s We have not received sufficient
perform material portions of Subcontractors.. review. The lenders will information on the
the Works. The Lenders need the IE to opine on (i) subcontractors capabilities.
suggest that the Contractor each main subcontractor’s
share a list of proposed adequacy of staff,
Subcontractors with the experience and expertise as
Independent Engineer for its well as (ii) key terms of the
review. subcontracts – price, LDs,
scope - , as well as (iii)
back-to-back aspect of EPC
Contractor obligations to
the Concessionaire and
subcontractors’ obligations
13
We note that the Owner’s proposed definition of Subcontractor only covers entities that perform services, and not those that supply equipment or materials.
This definition should be corrected.
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to the EPC Contractor
3. Suppliers The Owner is entitled to Given the consequences of The exercise of such right by OK, Lender approval of Owner
inspect the goods and an Owner-directed change in the Owner being subject to directed change in suppliers is
(§5.2(iv)) equipment used by the suppliers, the Lenders the approval of the Lenders covered in the current draft of the
Contractor in order to previously proposed that is already provided in the Credit Agreement.
ensure that they comply either (i) this option be Credit Agreement (Section
with the requirements of removed from the EPC 5.39).
the EPC Contract, Contract or (ii) any exercise
acknowledging that if of such right by the Owner
they do comply with be subject to approval of the
such requirements it will Lenders under the financing
not be entitled to direct a documents. As the Owner
change of such goods, has rejected any change to
equipment or suppliers. the terms of the EPC
Contract, the Lenders expect
The Contractor may this issue to be regulated by
accept a change in the financing documents.
suppliers selected by the
Owner if the Owner pays
any additional costs
resulting from the same
and assumes all
responsibility for the
performance of the
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relevant goods or
equipment.
4. Schedule The Contractor is Owner to provide an update The Sponsor will provide an (a) Sponsor to provide an See Section 4.3.7.2 for Delay
obligated to perform the regarding the status of the update regarding the status update and confirm the Analysis.
(§§5.3, Works in accordance conditions to of the project.
10.3) expected date for issuance
with the schedule commencement of of the notice to proceed and
attached as Annex C and construction. The Lenders start of construction under
achieve commercial note that the cushion vis-a- the EPC Contract.
operation within 35 vis the guaranteed
months (34 months plus Commercial Operation Date The Lenders note that the
1 month for the set forth in the Concession cushion vis-a-vis the
Experimental Operation Contract (February 6, 2019) guaranteed Commercial
Period) after satisfaction is less than 4 months and Operation Date set forth in
of the conditions will continue to reduce on a the Concession Contract is
precedent to day-for-day basis until such currently only 2 months and
commencement of conditions are satisfied. continues to decrease on a
construction set forth in day-for-day basis.
Section 10.3. The schedule is generally
subject to review and The Lenders expect the
The conditions to comment of the Independent Independent Engineer to
commencement of Engineer.
comment on this 2-month
construction include,
among others, (i) buffer for purposes of the
obtainment by the Owner contingent equity sizing.
of all necessary permits,
(ii) delivery by the Please note that the IE (b) The IE Report will need to See Section 4.3.7.2 for Delay
Owner of the land provides a new analysis and reflect the latest information Analysis and revised Section
necessary for the commentary of the Schedule regarding the schedule, (Project Schedule)
substations, (iii) delivery taking into account a start of including the currently
by the Owner of 50% of construction in January 2016 estimated date for start of
the rights-of-way construction.
necessary for the
performance of the
Works and (iv) payment
of the Advance.
Permits The Owner is responsible The Owner assumes broad (a) The Lenders reiterate their
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(§5.3.1) for obtaining, among permitting obligations, prior observations. Please
5. others, (i) the increasing the risk of refer to the Independent
environmental permit schedule delays and/or price Engineer’s
issued by the MEM, (ii) adjustments as the result of a recommendations regarding
the certificates of non- delay or failure by the responsibility for permitting
existence of Owner to comply with such in Section 4.3.3 of the IE
archaeological remains obligations; this may have Report.
(CIRAs), (iii) recovery of an impact on the sizing of
archaeological remains contingent equity.
(if any), (iv) local
construction permits, (v) Owner to provide an update The Sponsor will provide an (b) Sponsor to provide an
agreements with local on status of permit and update regarding the status of update, including as to the
communities and (vi) all rights-of-way acquisition. the project. status of permit and rights-
rights-of-way and other As noted in the Concession of-way acquisition.
real estate rights Contract Financeability
necessary for the Project. Comments,14 the Owner The draft Rights
should provide a detailed Acquisition Plan remains
The Contractor is solely subject to review by the
responsible for obtaining plan, including a timeline,
explaining how it will Property Rights Consultant,
(i) waste permits, (ii) the Lenders and their
permits for temporary acquire all easements, rights
of way and other necessary Peruvian counsel.
installations, (iii) water
use permits and (iv) rights related to land
quarry and dumping remaining to be acquired, its
permits. estimate for the costs of such
acquisition, and whether
such costs have been
included in the construction
budget.
14
“Moyobamba-Iquitos Transmission Line Project: Preliminary High-Level Financeability Comments on the Concession Contract,” White & Case LLP draft
dated February 21, 2015, with Miranda & Amado comments dated March 2, 2015, and Hernandez & Cía Abogados comments dated March 12, 2015.
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local communities.
6. Coordina The Contractor is This language will need to Sponsors agree to tighten the Section 5.5 should be modified as
tion obligated to collaborate be tightened (e.g. the language in Section 5.5 as follows:
with the Owner in the Contractor should be follows:
(§5.5) coordination of the work obligated to coordinate “5.5 Coordinación con
of other Project directly with other “5.5 Coordinación con Contratistas
contractors (including the contractors and such other Contratistas
En aquellos aspectos que
Moyobamba – contractors will not En aquellos aspectos que estén directamente
Carhuaquero project), necessarily be “Project” estén directamente relacionados al presente
without assuming any contractors). relacionados al presente Contrato, el Contratista
responsibility for the Contrato, el Contratista colaborará con el Cliente en
work of such other colaborará con el Cliente en las labores de coordinación
contractors. las labores de coordinación que se lleven a cabo
que se lleven a cabo con coordinará con otros
otros contratistas del contratistas del relevantes
relevantes para el desarrollo para el desarrollo del
del Proyecto (incluyendo el Proyecto (incluyendo el
proyecto Carhuaquero – proyecto Carhuaquero –
Moyobamba). Ello no Moyobamba). Ello no
implicará la asunción de implicará la asunción de
responsabilidad alguna por responsabilidad alguna por
parte del Contratista sobre parte del Contratista sobre el
el cumplimiento de las cumplimiento de las
obligaciones asumidas por obligaciones asumidas por los
los otros contratistas.” otros contratistas.”
7. O&M The Contractor is The Contractor should be Sponsors propose O&M Timing for delivery of the O&M Typically a received and
Manual obligated to prepare and obligated to deliver the Manual to be delivered no Manual remains subject to review approved manual is a Condition
deliver to the Owner an O&M manual by a date later than one (1) month by the Lenders and the Precedent to the completion of
(§5.6) O&M manual for the certain; Independent prior to the commencement Independent Engineer. the construction phase with
Transmission Line, Engineer to advise. of the Experimental sufficient lead time to ensure
including with sufficient Operation Period. timely registration with the
anticipation to allow the COES.
Owner to make
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comments thereto.
8. Transfer The Contractor is The EPC Contract should Sponsors propose to include Section 7.1(vi) should provide as
of Title obligated to deliver the specify precisely when title the following wording as follows:
Transmission Line to the to the Works passes to the Section 7.1(vi):
(§§7.1) Owner in accordance Owner. The Lenders would “(vi) Sin perjuicio de lo
with the technical typically expect title to “(vi) Sin perjuicio de lo establecido en el numeral (ii), las
provisions of the EPC transfer upon the earlier of establecido en el numeral Partes acuerdan que la
Contract. Upon (i) payment for the relevant (ii), las Partes acuerdan que titularidad sobre las Obras será
transferring the Works to Works and (ii) installation of la titularidad sobre las trasladada al Cliente
the Owner, the the Works at the site, with Obras será trasladada al gradualmente, de modo tal de que
Contractor guarantees title to all of the Works Cliente gradualmente, de la propiedad sobre cualquier
that the Works will be passing at Provisional modo tal de que la porción de las Obras pasará
free and clear of any Acceptance. propiedad sobre cualquier automáticamente al Cliente una
liens created by or porción de las Obras pasará vez que: (i) el Cliente haya
attributable to the automáticamente al Cliente efectuado a favor del Contratista
Contractor, its un vez que: (i) el Cliente el pago correspondiente a dicha
Subcontractors, haya efectuado a favor del porción de las Obras de
employees, agents or Contratista el pago conformidad con lo previsto en la
suppliers. correspondiente a dicha Cláusula Décimo Tercera del
porción de las Obras de presente Contrato; o, (ii) dicha
conformidad con lo previsto porción de las Obras haya sido
en la Cláusula Décimo efectivamente instalada en el
Tercera del presente Sitio; lo que ocurra primero,
Contrato; o, (ii) dicha siendo en este último caso (ii)
porción de las Obras haya pagadas las Obras de acuerdo a
sido efectivamente instalada lo indicado en la Cláusula
en el Sitio; lo que ocurra Décimo Tercera. De existir un
primero, siendo en este remanente, la propiedad sobre la
último caso (ii) pagadas las totalidad de las Obras pasará
Obras de acuerdo a lo automáticamente al Cliente una
indicado en la Cláusula vez que se produzca la Recepción
Décimo Tercera. De existir Provisional de las mismas.”
un remanente, la propiedad
sobre la totalidad de las
Obras pasará
automáticamente al Cliente
una vez que se produzca la
Recepción Provisional de las
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mismas.”
9. Insuranc Section 7.5 sets forth the Subject to the review and Considering that Section 7.5 Subject to review by the Lenders
e insurance requirements comment of the Insurance of the EPC Agreement refers and the Insurance Consultant.
of the Parties. Advisor. Among others, the to the obligation of the
(§7.5) Lenders would expect the Client to hire insurances.
Lenders (or their agent) to be The specific requirements of
named as additional insured the Lenders in connection
and, subject to the with these insurance policies
Concession Contract, loss shall be regulated in the
payee as well as a Financing Documents and
requirement that the relevant not in the EPC Contract.
policies contain waivers of
subrogation by the insurer.
10. Performa Within 30 days after the The sizing of all (a) Subject to review by the See Section 4.6 – EPC
nce Construction performance security is Lenders. To the extent Contractor Security Package
Security Commencement Date, subject to the review of the possible, IE will compare
the Contractor is Independent Engineer. the overall performance
(§7.6) obligated to deliver (i) security package to
the Parent Guaranty comparable assets
issued by Grupo Isolux construction contractual
Corsán S.A. in the performance arrangements
amount of
US$30,000,000, (ii) a The creditworthiness of the (b) Subject to review by the
standby letter of credit or parent guarantor is subject to Lenders.
fianza (at the the ongoing review of the
Contractor’s option) in Lenders.
the form attached to the
EPC Contract and in an
The liquidity of the Sponsor propose: (c) The form of performance
amount equal to 4.6% of
instruments described in security remains subject to
the Price to guarantee the “7.6 Garantías
items (ii) and (iii) [in the the review by the Lenders
Contractor’s obligation
column to the left] is not (i) Dentro de los treinta (30) and their advisors;
to pay penalties and
clear. The Lenders and their días calendario siguientes a la assuming the performance
damages and (iii) a
advisors would need to Fecha de Inicio de Construcción security is a truly liquid
standby letter of credit,
fianza or insurance review the proposed forms de la Línea Eléctrica el instrument, the Lenders
of fianza and insurance are evaluating whether
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policy (at the policy in order to take a Contratista deberá entregar al 15% of the contract price
Contractor’s option) in view on the same. Cliente una Garantía de Fiel is acceptable.
the form attached to the Cumplimiento de la Obra, por
EPC Contract and in an The EPC Contract does not un monto equivalente al 15% del Sponsor to provide drafts
amount equal to 5.4% of contain minimum Precio Total del Contrato, of the proposed
the Price to guarantee the requirements (ratings or emitida por entidad financiera performance security for
Contractor’s otherwise) for the issuers of (banco o compañía de seguros) the Lender and their
performance of its the performance security and de la misma categoría de las que counsels’ review.
obligations under the does not contain customary aprueba Proinversion para las
EPC Contract. protections (i) allowing the actuales licitaciones y de (d)Sponsor to explain the
Owner to draw on the acuerdo al modelo del Anexo F. proposed issuer
Upon Provisional performance security in full requirements, including in
Acceptance, the Owner is if it would otherwise expire terms of credit rating.
required to return the prior to Provisional
foregoing performance Acceptance or upon a
security to the downgrade of the issuer and (e) Please note the Lenders’
Contractor, and the (ii) requiring a re-adjustment previous comments
Contractor is obligated to of the amount of the regarding (x) the right of
deliver the Warranty performance security upon the Owner to draw prior to
Security, through the an increase in the Price expiration or upon any
delivery of the Parent (which, as noted elsewhere, failure of the issuer to
Guaranty, in the amount appears likely). These satisfy the minimum
of US$5,000,000. should be included. requirements and (y) re-
adjustment upon an
It is not clear whether the increase in the Price.
Contractor intends that the
different types of
performance security
guarantee different
obligations; Owner to
advise. This would be
unusual in the Lenders’
experience.
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The Lenders would typically (ii) Adicionalmente, el (f) As noted in the Lenders’
expect a parent guarantee to Contratista emitirá una prior comments, the
backstop all of the Garantía Corporativa por un Lenders would typically
contractor’s obligations monto equivalente al 10% del expect a parent guarantee
under the relevant contract, Precio Total del Contrato. to be a full guarantee of
and not be limited to a fixed performance, and not
amount (as would be the limited to a fixed amount
case for liquid performance as in the case of payment
security). security.
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división, excusión y órden,
which could affect the
Owner’s ability to draw on
the guaranty;
- the guarantor is not
obligated to pay default
interest on late payments;
- the guarantor is not
obligated to cover costs and
expenses arising from
enforcement of the
guaranty;
- the guarantor does not
provide standard
representations and
warranties;
- the guaranty should be
executed by the Owner as
well in order to ensure the
validity of the pacto de
liquidez and
- the guaranty should be
elevated to a public
instrument in order to
qualify as a título ejecutivo.
The Lenders would also La Garantía de Fiel (h) Please note the Lenders’
expect the delivery of Cumplimiento de Obra deberá prior comments regarding
performance security to be a estar vigente hasta la fecha de the timing for delivery of
condition to commencement Recepción Provisional de la performance security.
of construction (which may Obra y garantizará la correcta
be waived by the Owner, ejecución de las obras y trabajos
subject to Lender consent) de construcción, así como la
and in any event a condition provisión de bienes, equipos y
materiales en general para la
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to payment of the Price. ejecución del Proyecto en los
términos, plazos y condiciones
establecidas en el presente
Contrato.
(iii) Para la liberación del pago (i) It is not clear from the To be reviewed upon receipt.
del Adelanto a que se refiere el language in the column to The advanced payments can be
numeral 8.1.2 de la Cláusula the left how the Advance amortized according to the
Octava y su posterior Payments will be progress of the construction. The
amortización como indica el amortized; Owner to outstanding advanced payment
numeral 8.1.3 de la Cláusula advise. should be 100% guaranteed by a
Octava, el Contratista deberá liquid security.
presentar garantías adicionales Subject to review by the
de los mismos importes emitida Lenders and the
en el mismo formato y Independent Engineer.
condiciones que la Garantía de
Fiel Cumplimiento de la Obra,
las cuales se reducirán
progresivamente conforme al
porcentaje de certificación
realizado.
Esta Fianza podrá ser cubierta (j) It is not clear from the
por las Fianzas que reciba el language in the column to
Contratista por parte de los the left how the Advance
Subcontratistas. Payments security would
be “covered by the
Fianzas received by the
Contractor from
Subcontractors”. The
Lenders expect the Owner
to require advance
payment security in its
name issued on behalf of
the Contractor.
See Section 4.6.1 for summary
The Contractor is not (iv) Ocurrida la Recepción (k) The proposed 3% of the
opinion on warranty. In our view,
obligated to provide the Provisional de la Obra, el contract price is subject to
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Owner with any liquid Contratista deberá entregar la review by the Lenders the warranty package (0.9% of
performance security in Garantía de Calidad de Bienes y following input by the EPC Price), in our opinion, is not
support of its obligations Reposición de Componentes, Independent Engineer on sufficient.
during the Warranty Period, mediante la entrega de Garantía the adequacy of the 3% as
which is very unusual in the por un monto de 3% del Precio compared to similar
Lenders’ experience. In the Total del Contrato, emitida por contracts.
event of a Contractor breach entidad financiera (banco o
(and assuming amounts compañía de seguros) de la As to the language
available to be set-off by misma categoría de las que providing that the security
the Owner are insufficient), aprueba Proinversion para las may be “covered by the
the Owner (and by actuales licitaciones y de Fianzas received the
extension the Lenders) may acuerdo al modelo del Anexo F, Contractor from
not have an efficient means y el Cliente deberá restituir la Subcontractors”, see the
to collect damages during garantía descrita en el numeral Lenders’ comments in the
the Warranty Period. (i) que antecede al momento de immediately previous row.
la Recepción Provisional de la See also the Lenders’
The Lenders also note that Obra.
the proposed amount of the comments above regarding
performance security during Esta Fianza podrá ser cubierta form of performance
the Warranty Period (less por las Fianzas que reciba el security and issuer
than 1% of the Price) is Contratista por parte de los requirements.
very low in their Subcontratistas.
experience; the Lenders
would typically expect the La Garantía de Calidad de
liquid performance security Bienes y Reposición de
to step down by no more Componentes deberá estar
than 50% at Provisional vigente por un período igual al
Acceptance. Periodo de Garantía y
garantizará: (a) el
funcionamiento de la Línea de
Eléctrica de acuerdo con los
estándares requeridos por el
Contrato; (b) la calidad de los
materiales, equipos,
instalaciones y bienes en general
que hayan sido suministrados
por el Contratista conforme al
presente Contrato; y, (c) la
reparación o reemplazo de
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componentes cuya utilización,
técnica o manipulación se vea
afectada por causas imputables
al Contratista.
En caso la Garantía de Calidad
y Bienes de Reposición de
Componentes sea ejecutada total
o parcialmente, el Contratista se
obliga a renovarla por un monto
equivalente al ejecutado, y su
vigencia deberá ser prorrogada
por el mismo plazo reconocido
en el Periodo de Garantía con
respecto a los trabajos y equipos
objeto de reparación o
reemplazo.
Las Garantías Corporativas
deberán ser devueltas una vez
transcurridos los plazos de
vigencia que se indican en la
presente cláusula.”
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11. Deposit Upon execution of the Independent Engineer to Sponsor propose: (a) The size of the Deposit Up-front payments typically
and EPC Contract, the Owner comment on the size of the and the Advance Payment consist of payments to
Advance is required pay a Deposit Deposit and Advance “8.1.2 Adelanto remain subject to review manufacturers and working
Payments of US$16,000,000, Payments. Asimismo, el Cliente se by the Lenders following capital for contractor. The
which will qualify as obliga a entregar al discussions with the working capital is determined by
(§8.1) arras confirmatorias in The Lenders are reviewing Independent Engineer. evaluating the EPC Contractor's
the treatment of the Deposit Contratista un Adelanto por
accordance with articles los conceptos del cash flow model, to which Arup
1477, 1478 and 1479 of with Peruvian counsel. As noted in the IE Report, does not have access. Advance
Presupuesto de Obra que se the Lenders would expect
the Peruvian Civil Code. indican a continuación y por payments can range from 10% -
As a condition to all advance payments to be 40% of the EPC price; thus, the
las sumas indicadas fully backed stopped with
commencement of seguidamente (en adelante, total amount (down payment
construction, the Owner liquid security. plus mobilization) is within the
el “Adelanto”). Dicho
is required to make the Adelanto será destinado The Lenders’ Peruvian typical range.
Advance Payments set para la ejecución de las counsel has advised that it
forth in Section 8.1.2. actividades de construcción sees no tax or legal
The Deposit and the de la Obra y será una disadvantage to
Advance Payments will condición esencial para la backstopping the Deposit
be amortized Fecha de Inicio de with liquid security.
proportionally from each Construcción de la Línea
payment of the Price. Eléctrica.
The Contractor must - 10%. % del Precio
deliver advance payment Total del Contrato
security in amount equal antes del Inicio de la
to the Advance Payments Construcción de la
(but not the Deposit) as a Línea eléctrica.
condition to payment.
- 10%. % del Precio
Total del Contrato a los
3 meses del Inicio de la
Construcción de la
Línea eléctrica.
Adicionalmente, para efectos del
pago de suministros se aplicarán
Adelantos de acuerdo a lo
descrito en la Cláusula Décimo
Tercera.”
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12. Owner The Owner is obligated Please see Issue 5 above. The Sponsor will provide an Please see Issue 5 above.
Obligatio to, among others: update regarding the status
ns of the project.
1) Permit access
(§8.2) to the Site and
any other areas
as necessary to
carry out the
Works;
2) Obtain all
necessary
rights-of-way
and real estate
rights in
accordance
with the
schedule to be
attached to the
EPC Contract;
3) Obtain and pay
for all access
roads
necessary for
the Project, to
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be identified by
the Contractor
at least 1
month prior to
the
commencemen
t of work;
4) Comply with
the conditions
to the
Construction
Commencemen
t Date;
5) Deliver the
Environmental
Impact Study
and
Environmental
Management
Plan to the
Contractor; and
6) Deliver the
CIRAs to the
Contractor and
undertake
archaeological
monitoring.
13. Recovery If at any time during the The Lenders believe that 60 The EPC Contractor (a) As noted in Issue 4 above, See Issue 4 above.
and performance of the days is excessive, consider that 60 days is a the cushion between the time
Accelerat Works, the Contractor is particularly in light of the reasonable period. Please the Contractor is required to
ion Plans delayed by more than 60 diminishing cushion note that due to the Lenders achieve commercial
days it will deliver to the described in Issue 4 above. request, LTP and the operation and the
(§10.4) Owner for its approval a To be reviewed in light of Sponsors have agreed to: (i) Commercial Operation Date
recovery plan. In the final project schedule. incorporate this provision in set forth in the Concession
addition, the Owner may the EPC Agreement; and, (ii) Contract is currently 2
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at any time direct an reduce the applicable term months and will continue to
acceleration of the from 90 to 60 days. reduce on a day-for-day basis
schedule at a price to be until construction
mutually agreed. commences. In light of the
foregoing and in order to
preserve such cushion, the
Lenders expect that an
acceleration plan may be
required now and reflected in
the project budget. To be
discussed following the
Sponsor’s update on the
project schedule.
As drafted, the Owner in The EPC Contractors do not (b) As noted previously, if the
practice has no right to direct agree with the Lender´s right to accelerate is subject
an acceleration of the Works proposal regarding the to mutual agreement on
because the Contractor must introduction of a mechanism price, then in practice there is
always agree to the price. If to calculate the price of the no right to accelerate. To be
a pre-agreed price-per- acceleration works. In their discussed in light of the
kilometer is not feasible, the experience, it is highly increasing likelihood that the
Lenders propose that the important for the parties to Works will need to be
price of the accelerated reach an agreement prior to accelerated to achieve the
Works be equal to the the execution of any Commercial Operation Date
Contractor’s reasonable and additional plan. If this is not by the date required under
documented direct costs plus the case, the chances of the Concession Contract.
a pre-agreed margin, subject facing a conflict that will
to a cap. end on arbitration are much
more likely. The Sponsors
consider that it would be
preferable to regulate that
the Parties shall agree to a
price acting in good faith.
Acceleration of the Works
may imply costs for the
Contractor that are not
known in advance. This
possibility should always be
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subject to agreement with
the Contractor.
The Owner may at any time (c) This proposal is not clear in To be reviewed upon receipt.
direct an acceleration of the light of the Contractor’s
schedule, but the Contractor previous comment which
shall present an acceleration rejects any pre-agreement on
plan with the reasonable and price; Sponsor to advise. In
documented direct cost any event, a 25% margin
resulting from the seems extremely high in the
acceleration plan plus a 25 Lenders’ view and will need
% margin. This margin to be evaluated in light of the
includes indirect costs. This likelihood of the need for an
plan should always be acceleration plan.
submitted to the Owner for
approval. The Lenders will require that
any acceleration plan
delivered by the Contractor
be subject to regulation under
the financing documents,
including a requirement that
such plan be validated (in
terms of schedule and
budget) by the Independent
Engineer.
14. Schedule The Contractor is entitled (a) In general terms and as (a) (a) The Lenders’ reiterate their
Relief to extend the schedule if previously discussed, the prior observations.
any of the following Contractor has broad rights
(§10.6) events affects the critical to schedule relief, thereby
path: increasing the likelihood of
cost and schedule
1) Changes to the adjustments. This may
Project or impact the sizing of the
scope of work contingent equity.
that affect the
schedule,
including (b) With respect to item 1 [in (b) OK but changes requested (b) This is acceptable in
the left-hand column], the by the principle as long as any
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changes Lenders would expect this administration/granting such change is not the result
required by the to be limited to changes entity should also be of an act or omission of the
Environmental directed by the Owner. covered Contractor.
Impact Study;
2) Material
breach by (c) Given that the EPC (c) The geotechnical studies (c) The EPC Contract should Arup recommends that this risk
Owner of its Contract is silent regarding have been carried out by the expressly provide that the be passed to the EPC
obligations; site/underground risk, this Contractor, who assumes Contractor bears the risk of Contractor
3) Suspension of item would appear to the correlating risk. The list site/geotechnical conditions
the Works by provide the Contractor of events which may cause and that it will not be
the Owner not relief in such circumstances schedule relief does not entitled to make a claim for
attributable to and shift such risk to the include geotechnical events, schedule or price relief
the Contractor; Owner. This is a which is in line with the arising from the same.
significant issue as site foregoing. Silence on the issue is not
4) Delays by the conditions are one of the sufficient, as there are a
Owner, the most common causes of number of open-ended
Supervisor or claims, and owners relief factors (e.g. items 1, 3
any third party typically attempt to have and 5 in the left-hand
for which contractors assume the risk column) which could be
Owner is of site conditions to the used by the Contractor to
responsible in extent discoverable by a make a claim as the result
complying reasonably experienced of site/geotechnical
with their contractor in order to conditions.
respective mitigate this risk.
obligations;
5) Force Majeure (d) Owner to provide update (d) The Sponsor will provide (d) Sponsor to provide an
or acts of third regarding the status of the an update regarding the update.
parties; approval of the status of the project
Environmental Impact
6) Stoppages Study and potential costs
caused by arising from the same; to
inspections or the extent the
supervision; Environmental Impact
Study will be issued prior to
7) Delays in the
the execution of the EPC
issuance of
amendment, the Lenders
necessary
would expect any such
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permits; impacts to be included
within the EPC Contract
8) Delays in and the removal of all
delivery of references to changes
necessary arising from the same.
rights-of-way
or other real
estate rights; (e) While item 2 [in the left- (e) (e) The Lenders reiterate their
and hand column] is a comments.
customary delay event, the
9) Delays in Lenders note that in light of
payments to the Owner’s broad
the Contractor. obligations in respect of
permits and real estate
The Contractor should rights, there would seem to
notify the Owner within exist a reasonably high
60 days after becoming potential for claims for
aware of the relevant schedule relief arising out
event and is entitled to of a breach by the Owner of
recover the amounts set its obligations.
forth in Section 14.1 in
such circumstances.
(f) The Lenders previously (f) The Sponsors agree to (f) Item 8 should be deleted as
proposed to delete items 4, delete items 4, 6 and 9. Item it is duplicative of Item 2.
6, 8 and 9 as they are 8 should remain.
duplicative of item 2. The
Lenders ask that the Owner
reconsider the Lenders’
request.
(g) The Lenders previously (g) The Sponsors agree to the (g) OK
proposed to delete the Lenders’ proposal.
reference to “acts of third
parties” in item 5 because it
is unclear and the relevant
event should have to
qualify as Force Majeure.
The Lenders ask that the
Owner reconsider the
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Lenders’ request.
(h) The Lenders previously (h) This is not acceptable. (h) The practical effect of this
proposed to delete item 7, Considering the relevance of relief event is that the
as it is unclear why there is permits, it is important and Contractor will be entitled
a separate event for delays reasonable to expressly to schedule relief upon any
in the issuance of permits; include permits in this delay in the issuance of a
this item should be covered section. permit, regardless of
by (and subject to the whether such delay
requirements of) the Force otherwise satisfies the
Majeure provision. The requirements of Force
Lenders ask that the Owner Majeure. Subject to review
reconsider the Lenders’ by the Lenders.
request.
(i) The Lenders note that the (i) All relevant aspects of the (i) This concern can be easily See Section 4.2.
Contractor has much Concession Agreement addressed by distinguishing
broader rights to schedule regarding the construction between relief factors that The penalties that relate to
relief under the EPC responsibilities of the are within the Owner’s responsibilities/risks held by
Contract than the Owner Project has been passed control (and for which the EPC Contractor are
under the Concession down to the Contractor. As Owner should not be appropriately passed down to
Contract, creating the in other projects, certain entitled to corresponding EPC Contractor for items
potential for a scenario obligations remain at relief under the Concession controlled by the EPC
where the Owner is liable Owner’s side since they Agreement) and relief Contractor..
for delays under the have direct control of such factors that are not within However, some obligations and
Concession Contract works during development the Owner’s control (and risks related to Conditions
without any recourse to the phase. Please note that there for which the Owner should Precedent for construction
Contractor. While this are several matters (as it is be entitled to corresponding (obtaining EIA approval, ROW
issue was previously the case of the obligations relief under the Concession acquisition, obtaining Project
mitigated to a large extent that correspond to LTP) that Agreement). To be and construction licenses, etc.;
by the cushion between the are not controlled by the discussed in connection See Section 4.3.4 for details)
guaranteed dates under the EPC Contractor and, hence, with the sizing of the have not been fully passed from
two agreements, as noted regarding which the EPC contingent equity. the Concessionaire to the EPC
above this cushion has been Contractor is not liable. Contractor, resulting in the
reduced significantly and Concessionaire holding risks
will continue to reduce until that could impact cost and/or
commencement of schedule. Best practices suggest
construction. The Lenders that all design and construction
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recommend that a back-to- related activities, including all
back provision be included, environmental and permitting
such that the Contractor is requirements, are passed down
only entitled to relief to the to the EPC Contractor such that
extent the Owner is entitled the CA and EPC Agreement are
to corresponding relief “back to back.” Consultation
under the Concession with a legal advisor is
Contract. recommended to determine
inconsistencies between the CA
and the EPC Agreement;
(j) The 60-day notification (j) Considering that it is a (j) It is not clear how the
period is far too long in the 600km work it is not length of the transmission
Lenders’ view (the Lenders reasonable for the term to line is relevant to the
had previously proposed 7 run from the occurrence of commencement of the
business days) and should the event. However, the notification period; the
begin to run once the event Sponsors agree to reduce the Contractor should utilize
occurs. In addition, as term from 60 to 45 days. the resources necessary to
previously proposed by the The introduction of a waiver appropriately monitor the
Lenders and in order for the of rights is not accepted. progress of the Project in
required notification period light of the scope of the
to have meaning, the same.
Contractor should waive
any rights to make a claim The Lenders reiterate their
if it fails to submit notice previous comments
within the required period. regarding the length of the
notification period and the
waiver of rights; without
such a waiver, the required
notification period will be
of limited value as in a
dispute scenario the
Contractor will bring claims
regardless of its compliance
with the requirements.
In addition, the proposed
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45-day notification period is
still too long.
(k) Please see Issue 21 below (k) Please see Issue 21 below
regarding Price regarding Price
adjustments. adjustments.
15. Contract The Contractor is entitled Given the significantly The EPC Contractor do not (a) The Lenders reiterate their
or to suspend the Works harmful effects of agree to limit the suspension prior comments with
Suspensi upon any grave and suspension on project right to payment defaults. respect to the events that
on repeated breach by the development, the Lenders may trigger the Contractor’s
Owner of its obligations. previously proposed that the suspension rights.
(§10.7) Contractor’s suspension
rights to be limited to The Sponsor is only willing (b) The Lenders may be in a
payment defaults subject to a to accept a 30-day cure position to accept a 30-day
cure period of 30 days. The period in general. cure period; provided that
Lenders believe that their such period begins at the
position is even further time the Contractor
justified because Peruvian provides notice of the
counsel has advised that Owner’s breach.
there is not a clear definition
of “grave and repeated
breach” under Peruvian law.
The Lenders ask that the
Owner reconsider the
Lenders’ request.
16. Provision Among the conditions to The Lenders propose that if Sponsors to consider this Subject to review by the Lenders For discussion.
al Provisional Acceptance a payment dispute is subject proposal over the basis of and the Independent Engineer.
Acceptan is that the Contractor has to dispute resolution, the the amount of the cap will be
ce paid all penalties and Contractor be entitled to 3% of the Contract.
other amounts owed to achieve Provisional
(§11.1) the Owner, unless the Acceptance so long as the
payment of such amounts amount subject of the
is subject to dispute dispute is less than a cap to
resolution in accordance be agreed.
with Section 19.
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17. Final Among the conditions to The underlined qualifier Considering the Lender´s The reference to “standard
Acceptan Final Acceptance is that imposes much too high of a concern and that pending operating conditions” is still
ce the Warranty Period standard, as there is a whole non-material work may somewhat vague and may not
(including any extension) host of work that may be persist, the Sponsors propose cover work necessary to ensure
(§11.2) has expired and the important to the Project but to amend section 11.2 (iii) as the long term operation of the
Contractor has completed not result in a complete follows: Project after the end of the
any warranty work that shutdown of the Warranty period.
prevents operation of the Transmission Line; the (iii) “haya expirado el Periodo
Transmission Line. Contractor should be de Garantía (incluyendo
required to complete all cualquier extensión a dicho
warranty work in order to periodo) y se haya
achieve Final Acceptance, as completado cualquier
is customary. trabajo derivado de una
reclamación de garantía
que imposibilite la
operación de la Línea
Eléctrica se requiera a
efectos de que la Línea
Eléctrica pueda ser
operada en condiciones
estándar de conformidad
con lo previsto en el
Contrato de Concesión;”
18. Delay The Contractor is Subject to the Independent Sponsors to await the review (a) The adequacy of the See response to Issue #1
Penalties obligated to pay a Engineer’s comment on the and comments of the prescribed amounts and
penalty equal to 0.01% proposed sizing of the delay Independent Engineer and caps on liquidated damages
(§12.1) of the Price for each penalties and caps; the any specific proposals by the remains subject to review
week of delay in Lenders would expect these Lenders which may be by the Lenders and the
Provisional Acceptance. penalties to be sized so that derived therefrom. Independent Engineer.
Upon passage of the 52 they are sufficient to cover
months specified in the all of the Owner’s costs
Concession Contract to during the delay
achieve Commercial
Operation, the Contractor .The Lenders note that if the Please note that a financial (b) This sizing of the
is obligated to pay the Contractor is only obligated exercise was already performance security is a
same daily penalties to pay the penalties set forth provided by Santander as related, but separate, issue.
specified in the in the Concession Contract, financial advisor taking into The Lenders expect that the
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Concession Contract, then such penalties will be account a worst case penalties will cover all of
subject to (i) a daily cap insufficient to cover the scenario of 10month delay the Owner’s costs during
of US$85,000 for each of Owner’s other costs (e.g. (vs 5 month delay in the CA) the period of delay.
the first 30 days, (ii) a debt service) during the in order to calculate LDs
daily cap of US$165,000 relevant delay. (debt service + Owner’s Sponsor to advise whether
for the next 30 days, (iii) other costs). This was taking proceeds of the proposed
a daily cap of The sub-cap for delay into account when proposing LDs will cover the
US$250,000 for the next penalties is low in the the liquid instruments as part Contractor’s obligations
90 days and (iv) an Lenders’ experience; the of the security package. As generally.
overall cap of Lenders typically see sub- you can see in this issues
US$30,000,000 (i.e. caps of no less than 10% of list, we have grouped the
4.6% of the Price). the contract price. different liquid guarantees
into a Garantía de Fiel
In order to collect the Cumplimiento de la Obra
delay penalties, the and elevated the threshold
Owner is obligated to from 10% to 15% in order to
prove that the delay is meet Lenders’ request and
directly attributable to a IE recommendations
breach by the Contractor
of its obligations. Please note that the penalties
have been agreed in the
context of the pre-
contractual negotiations and
this was taken into account
at the moment in which the
offer was prepared by the
EPC Contractor. It is likely
that any increase in the
penalties or the cap will
result in an increase in the
contract price.
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Lenders’ experience, as its
shifts the burden of proof to
the Owner and significantly
undermines the effectiveness
and liquidity of the delay
penalties. This language
should be eliminated.
19. Bonus If the Contractor Pending receipt of the To be define (a) Pending receipt of the
achieves Provisional Owner’s proposal. Owner’s proposal.
(§12.3) Acceptance prior to the
guaranteed date, it may
be entitled to receive a (b) The Contractor should not
bonus as shall be agreed be entitled to a bonus if
between the Parties. Provisional Acceptance is
achieved prior to the
guaranteed date due to an
Owner’s acceleration plan.
20. Global The Contractor’s The Contractor’s liability It is neither standard nor (a) The Lenders disagree as to Arup opines that the 25%
Liability aggregate liability under cap is very low in the reasonable to include a cap what is “standard” in light liability cap seems
Cap the EPC Contract shall Lenders’ experience; the of 100%. Please note that, of recent and directly appropriate from a technical
not exceed 25% of the Lenders have seen caps of due to Lender’s requests, the relevant precedents point of view.
(§12.4) Price, with carve-outs for 100% of the contract price in parties have already agreed financed by international
willful misconduct (dolo relevant precedents. to increase the liability cap lenders under a project
o culpa inexcusable) and from 10% to 25%. Any finance model.
third-party indemnities. further increase is not
acceptable. (b) The size of the global
liability cap remains subject
to review by the Lenders
and the Independent
Engineer.
Other customary items Due to Lender´s requests we (c) The Lenders reiterate their (d)
should also be carved out have already excluded the previous comments. The
from the liability cap, indemnities arising from issue is not whether the
including amounts received third party claims. Contractor is entitled to
from insurance and Considering that, in keep the proceeds, but
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subcontractors and damages accordance with the terms of rather that to the extent the
arising from a breach of the EPC Contract, the EPC Contractor receives
warranty obligations or Contractor can decide proceeds of insurance or
abandonment. whether to hire from subcontractors in
subcontractors or to hire respect of claims by the
additional insurances, it is Owner under the EPC
reasonable for the EPC Contract, then it is
Contractor to keep those essentially acting as a pass
proceeds. through; as such, these
amounts should not count
against the Contractor’s
liability cap, as is
customary.
21. Price The Contractor is entitled (a) In general terms and as (a) Please refer to our (a) Please generally see our
Adjustme to adjust the Price in the previously discussed, the comments to item 14 above. responses in Issue 14.
nts following circumstances: Contractor has broad rights
to price relief (both in terms
(§13.1) 1) If the of the scope of events
Transmission which give rise to relief and
Line route is the amounts to which the
extended as the Contractor is entitled),
result of the thereby increasing the
Environmental likelihood of cost overruns.
Impact Study, This may affect the sizing
the Owner will of the contingent equity
pay the price
per kilometer
set forth in (b) The Lenders also note that (b) Please refer to our (b) Please generally see our See responses to Issue #14
Annex A; the Contractor is entitled to comments to item 14 above. responses in Issue 14.
much broader price relief
2) Changes in the under the EPC Contract
Transmission than the Owner under the
Line route as Concession Contract.
the result of the Please see Issue 14 above.
Environmental
Impact Study; (c) Please see Issue 14 above (c) Please refer to our (c) Please generally see our
3) Changes regarding the status of the comments to item 14 above. responses in Issue 14.
Environmental Impact
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requested by Study.
the Owner;
4) Any of the (d) As noted above, these (d) Please refer to our (d) Please generally see our
events entitling provisions would seem to comments to item 14 above. responses in Issue 14
the Contractor shift all Site risk to the
to schedule Owner.
relief under
Section 10.6; (e) The Lenders many times (e) This is not acceptable. The (e) Subject to ongoing review by
see contractors assume the risk of force majeure shall the Lenders as part of the
5) Force Majeure; risk of increased costs be assigned to the EPC contingent equity sizing
6) Stoppage of the resulting from Force Contractor. Please note that, analysis.
Works for Majeure, and thus proposed unlike the other events, no
reasons not the deletion of item 5. The profit is included herein.
attributable to Lenders ask that the Owner
the Contractor; reconsider the Lenders’
request.
7) Changes in
suppliers (f) The Lenders also proposed (f) In the Sponsor’ opinion, the (f) The Lenders reiterate their
directed by the the deletion of items 4, 6, 7 items 4, 6, 7 and 8 are not previous comments; as just
Owner and 8 because they overlap overlapping (i.e. those items one example, item 4 covers
pursuant to with, and in some cases are may cover different any event entitling the
Section 5.2; inconsistent with, other scenarios) or inconsistent. Contractor to schedule relief,
8) Delays of more provisions. The Lenders Please let us know if you which includes (among
than 7 days in ask that the Owner have any specific concern others) “suspension of the
signing the reconsider the Lenders’ Works by the Owner not
Provisional request. attributable to the
Acceptance Contractor”, which overlaps
Certificate or with item 6.
Final
Acceptance (g) The Lenders note that the (g) It is important and standard (g) While the Lenders agree that
Certificate; inclusion of price relief for practice to include a change it is common for contractors
Change in Law is new. in law provision. The EPC to be entitled to certain relief
9) All general, Contractor shall not bear the for changes in law, the
direct and risk of changes in law. Lenders note that this relief
indirect costs factor was not included in the
incurred by the executed EPC Contract
Contractor originally provided to the
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during the Lenders for review. In light
Experimental of the Contractor’s repeated
Operation assertion that the Lenders’
Period; requests are inconsistent with
the commercial deal struck
10) Any amounts by the parties, it would seem
agreed by the appropriate for this
parties as the commercial deal to cut both
result of an ways.
acceleration
request by the
Owner (h) Independent Engineer to (h) Subject to Independent (h) Subject to Independent Regarding escalation, we
pursuant to comment on the Engineer’s review and Engineer review. recommend that the EPC
Section 10.4; appropriateness of the comments. Agreement should be lump sum
inclusion of the proposed without escalation. However, if
11) Change in escalation indices; many applied, escalation indices are
Law; and times prices are not subject governed by Peru's "formula
to escalation. polinomica"
12) Escalation in
accordance
with the US (i) In general terms, the (i) The Contractor is entitled to (i) The 25% margin is extremely
finished goods Lenders would expect the reasonable and documented high in the Lenders’ view. It
less food and Contractor’s recovery to be direct costs plus a 25 % is also unclear why the
energy index limited to reasonable and margin when it comes to an Contractor would be entitled
and Peruvian documented direct costs increase of works volume to a fixed US$2 million
consumer and, in circumstances and 2 million USD for each payment for each month of
prices index. where the relevant event is month of schedule relief. schedule relief regardless of
within the Owner’s control, the actual impact.
Except in the cases of a pre-agreed profit. It is not
items 1 (fixed price per clear what the concept of
kilometer), 5 (Contractor “general expenses” is
entitled to direct costs intended to cover; Owner to
and general expenses) comment.
and 13 (escalation), in
each case the Contractor (j) The 30-day notification (j) The 30-day term is (j) Please see our comments to
is entitled to direct costs, period is too long in the reasonable (especially Issue 14 above.
general expenses and Lenders’ view (the Lenders considering the complexity
profit in a percentage to had previously proposed 7 and length of the Project and
be determined. business days) and in any the information that shall be
event inconsistent with the included in the notice). The
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The Contractor should notice period for schedule reference to the Contractor
notify the Owner within delays. It should also begin waiving its rights to make a
30 days after becoming to run once the event claim is not acceptable.
aware of the relevant occurs. In addition, in
event. order for the required
notification period to have
meaning, the Contractor
should waive any rights to
make a claim if it fails to
submit notice within the
required period.
22. Payments The Price shall be paid Independent Engineer to Subject to Independent (a) Subject to Independent See Section 4.5 in Report. See
through monthly advise generally regarding Engineer’s review and Engineer review. Issue #11 regarding Advanced
(§§13.4, progress payments within proposed payment schedule, comments. Payments
13.5) 30 days after receipt of including split of progress
the relevant invoice by payments for construction
the Owner. In addition, and milestone payments for
the Owner shall pay for procurement, measurement
equipment through of progress and 5 business
milestone payments day invoice review period
(15% upon issuance of provided to the Owner.
the purchase order, 75%
upon arrival of the The Owner should be As a general rule, the (b) The Lenders reiterate their
equipment at the port of expressly entitled to set-off Sponsors consider that the previous comments; there
entry and 10% upon any amounts owed by the right to set-off amounts could be any number of
arrival at the Site) within Contractor from amounts it without prior authorization amounts owed by the
30 days after receipt of owes to the Contractor; should be limited to the Contractor in addition to
the relevant invoice. while Section 12.1 allows penalties. In case there is penalties (indemnities,
the Owner to set-off any specific payment (other warranty claims, etc.) and to
amounts owed from the than the penalties) that is limit the set-off provision in
Contractor for delay causing a concern in such a way would be very
penalties, there are many connection with this matter unusual.
other circumstances where please let us know.
the Contractor may owe
amounts to the Owner. Set-
off may be the most
effective mechanism for the
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Owner to recoup amounts
owed, particularly in
circumstances where the
Owner does not benefit from
liquid performance security.
23. Force Force Majeure is defined While the general definition As mentioned by the (a) The fact that the Concession For discussion.
Majeure as any event, condition of Force Majeure is Lender’s the general Agreement and EPC
or circumstance that is generally consistent with the definition of Force Majeure Contract are separate
(§14) beyond the reasonable definition set forth in the under the EPC Contract is agreements is not
and foreseeable control Concession Contract, please generally consistent with the determinative; it is common
of the affected party that note that the Grantor must definition under the in projects anchored by a
results in a breach by agree to any extension of the Concession Agreement. concession or revenue
such party of its schedule under the However, considering that contract for contractors to
obligations under the Concession Contract, thus the Concession Agreement agree that they will only be
EPC Contract. there could be circumstances and the EPC Contract are entitled to force majeure
where the Contractor is different agreements and that relief to the extent the project
Force Majeure includes, entitled to Force Majeure the EPC Contractor is not owner is entitled to
without limitation: relief under the EPC liable for all the obligations corresponding relief under its
1) War, Contract while the Owner is under the Concession contract.
insurrection, not entitled to corresponding Agreement, it is not possible
relief under the Concession to subject the existence of a In any event, the Lenders,
acts of following consultation with
terrorism, etc.; Contract. force majeure event under
the EPC Contract to the Independent Engineer,
2) Strikes by recognition by the Grantor will consider the potential
employees that under the Concession mismatch in schedule relief
do not have a Agreement. in sizing contingent equity,
labor among others.
relationship
with the The Lenders previously As mentioned before, we do (b) Subject to review by the
Contractor, proposed the following not agree with the proposed Lenders.
from and after customary carve-outs to the carve-outs (proposed carve
the 5th day of definition of Force Majeure, outs that are not included in
the strike; precisely because they could the Concession Agreement).
otherwise fall within the In our experience it is
3) Earthquake, general definition of Force preferable to evaluate
flood, Majeure: (i) economic possible force majeure
hurricane, hardship, (ii) changes in events on a case-by-case
tornado and
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similar events; market conditions, (iii) basis instead of including
and failures by subcontractors, ex-ante exclusions. The
(iv) lack of equipment, conditions for a force
4) Destruction of labor, goods or materials, (v) majeure event have been
the Works for breakdown of machinery and clearly regulated in Section
causes not (vi) strikes of employees of 14.2 and, hence, no events
attributable to Contractor´s affiliates and that fail to comply with such
the Contractor. subcontractor/suppliers. The conditions shall be deemed
Lenders ask that the Owner as a force majeure event.
reconsider the Lenders’
request.
24. Terminat The Owner may (a) The 30-day period for (a) The Sponsors accept the (a) OK
ion for terminate the EPC replacement of credit Lenders’ proposal.
Contract Contract upon: support should run from the
or occurrence of the event, not
Breach 1) Insolvency of request.
(i) the
(§15.2) Contractor or
(ii) any issuer (b) The reference to dispute (b) This is not acceptable. (b) Sponsor to explain why the
of credit resolution in item 3 is not Lenders’ comments are not
support if the appropriate and in any acceptable. The Owner’s
relevant credit event is not consistent with payment default does not
support has not the Owner’s corresponding include such language.
been replaced payment default in Section
within 30 days 15.3.
of request;
(c) The reference in item 4 (c) The Sponsors accept the (c) OK
2) Failure to should be to any liability Lenders’ proposal.
deliver the cap, so that it picks up the
Transmission sub-cap for delay penalties
Line within as well.
150 days
following
February 6, (d) Given that Peruvian counsel (d) The Sponsors accept (d) The request was not to
2019; has advised that there is no exclude item 7. exclude item 7 (which would
clear legal definition of be prejudicial to the Owner),
3) Payment “grave and repeated” but rather to include a
breaches, the Lenders standard that may be enforced
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default (subject recommend a clear standard by the Owner.
to a 30-day that may be enforced by the
cure period and Owner.
the amount not
being the (e) Items 1, 3, 4, 5 and 9 (e) Sponsors agree to exclude (e) Subject to review by the
subject of should also be excluded items 1,3, 4 and 9 from the Lenders.
dispute from the cure period. cure period. In the case of
resolution); item 5 the cure period is
4) Reaching the necessary
liability cap; : “(iii) Falta de pago por
5) Abandonment; parte del Contratista al
Cliente durante un periodo
6) Breach of mayor a treinta (30) días
representations siempre que haya
and warranties; transcurrido un periodo de
cura de treinta (30) días y
7) Any other que el monto no pagado no
grave and haya sido sometido al
repeated mecanismo de solución de
breach by the controversias previsto en la
Contractor; Cláusula 19.”
8) Duration of
Force Majeure
for more than
12 months; or
9) Termination of
the Concession
Contract.
All termination events
are subject to a 30-day
cure period other than
items 2 and 6.
25. Conseque Unless terminated due to The reference to “without The Sponsors propose to (a) The Lenders reiterate their
nces of extended Force Majeure prejudice to the other amend the wording in the prior comments. The Owner
Terminat or a termination of the obligations of the Contractor final paragraph of section should be entitled to exercise
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ion for Concession Contract for under the Contract” is 15.2 as follows: all appropriate remedies and
Contract reasons exclusively not unclear. As previously recover all damages under
or attributable to the noted, the Owner should be (…) el Contratista estará applicable law (subject to any
Breach Contractor, the expressly entitled to recover obligado a abonar al Cliente agreed liability caps),
Contractor is obligated to all of its damages arising en concepto de gastos por regardless of whether the same
(§§15.2; pay the Owner a from the breach and the terminación anticipada un are expressly contemplated in
15.6) termination fee equal to Contractor should be 5% sobre la parte del precio the EPC Contract.
5% of the portion of the obligated to vacate the Site, correspondiente a la obra
Price corresponding to deliver all material and dejada de ejecutar, sin
the work pending to be equipment purchased by the perjuicio de las otras
performed, without Owner and assign any obligaciones del Contratista
prejudice to the other subcontracts requested by derivadas del Contrato, tales
obligations of the the Owner. . como el pago de penalidades
Contractor under the e indemnizaciones que
EPC Contract. In podrían resultar aplicables.
addition, the Owner is
entitled to receive an Sponsors agree to the EPC (b) The Contractor should be
amount equal to double Contractor being obligated obligated to assign any
the unapplied Deposit as to vacate the site, deliver all subcontracts requested by the
of the date of material and equipment Owner.
termination. purchased by the Owner and
assign any Major See the Lenders’ comments in
Subcontracts requested by Issue 2 above.
the Owner.
26. Terminat The Contractor may Given that the Owner’s The Sponsors accept exclude OK
ion for terminate the EPC fundamental obligation is to item 3.
Owner Contract upon: pay the Price and in light of
Breach the potentially catastrophic
1) Insolvency of consequences to the Project
(§15.3) the Owner; of a termination of the EPC
2) Payment Contract, the Lenders
default, subject previously proposed to
to a 60 day delete the termination right
cure period; arising from “grave and
repeated” breaches. The
3) Any other Lenders believe that this
grave and request is further justified
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repeated because Peruvian counsel
breach by the has advised that such terms
Owner; has no clear legal meaning
under Peruvian law. The
4) If the Lenders ask that the Owner
Construction reconsider the Lenders’
Commencemen request.
t Date has not
occurred
within 365
days following
completion of
engineering;
and
5) Duration of
Force Majeure
for more than
12 months.
27. Conseque Unless terminated due to The Contractor has more This matter has already been It remains unclear why the
nces of extended Force Majeure, favorable termination clarified in item 25 above. Contractor is entitled to both its
Terminat the Owner is obligated to remedies than the Owner, as The Sponsors do not costs and a fixed fee.
ion for pay the Contractor (i) all it is expressly entitled to consider that the Contractor
Owner termination payments both termination costs as has more favorable
Breach owed to subcontractors well as the 5% fee. The termination remedies.
and suppliers and any Contractor’s recovery should
(§15.3) others related to the be limited to amounts owed
termination and (ii) a for work performed and
termination fee equal to reasonable and documented
5% of the portion of the direct costs resulting from
Price corresponding to the termination.
the work pending to be
performed. In addition,
the Contractor is entitled
to retain the unapplied
Deposit.
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28. Confiden Neither party may The confidentiality provision Please propose a specific The Lenders and their counsel
tiality disclose the existence of is both insufficient (it only replacement or change to the will propose a revised clause.
the EPC Contract or the covers very specific sub-sets confidentiality provision.
(§17) activities to be performed of information) and overly
under the same without restrictive (e.g. as written the
the prior consent of the Owner would be in breach
other party (except for today for sharing the
communications to the agreement with the Lenders
Grantor or and their advisors). The
OSINERGMIN under the Lenders recommend
Concession Contract). In replacing Clause 17 with a
addition, the Contractor standard confidentiality
may not reveal clause.
information disclosed by
the Owner relating to its
installations or the use of
the Transmission Line.
In either case, the parties
may disclose information
required by a
Governmental Authority
under Applicable Law
subject to complying
with certain mitigating
actions.
29. Represen Section 18 contains the The Lenders will require The Sponsors proposes the Subject to review by the Lenders
tations Contractor’s representations relating to following provisions: in light of their internal
and representations and anti-corruption, sanctions requirements; the Lenders note
Warranti warranties. and anti-money laundering, “19.12 Cumplimiento de that sanctions are not covered by
es (§18) as previously proposed by Leyes Aplicables the proposed provisions.
them.
El Contratista no se encuentra
en incumplimiento en cualquier
aspecto sustancial de cualquier
Ley Aplicable o autorización
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contempladas bajo el
presente Contrato;
(ii) Ofrecido, pagado,
dado, prometido dar,
autorizado el pago
de, o tomado
cualquier acción para
efectos del pago de
cualquier valor
directa o
indirectamente a una
Autoridad
Gubernamental o
cualquier otra
Persona para
influenciar de manera
ilegal las acciones
del receptor o de otra
manera obtener o
retener negocios o
procurar una ventaja
indebida de negocios,
en cada caso respecto
del Proyecto y las
transacciones
contempladas bajo el
presente Contrato; o,
(iii) De otro modo violado
o incumplido
cualquier aspecto
material de cualquier
estipulación de
cualquier Ley Anti-
Corrupción respecto
del Proyecto y las
transacciones
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contempladas bajo el
presente Contrato.
(b) El Contratista ha
implementado y mantiene
en efecto políticas y
procedimientos
diseñados para asegurar
el cumplimiento con las
Leyes Anti-Corrupción
aplicables por parte del
Contratista, sus
directores y gerentes
(actuando en
representación del
Contratista), en cada
caso respecto del
Proyecto y las
transacciones
contempladas bajo el
presente Contrato.
(c) El Contratista no ha
cometido o realizado,
respecto del Proyecto o
cualquier transacción
contemplada bajo el
presente Contrato,
cualquier violación de
cualquier Ley Anti-
Corrupción o Ley Anti-
Lavado de Activos que
podría esperarse
razonablemente que
tenga un efecto material
adverso sobre la
capacidad del
Contratista de cumplir de
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manera oportuna con
cualquiera de sus
obligaciones materiales
bajo el presente
Contrato.
19.12.2 Leyes Anti-Lavado de
Activos
Las operaciones del Contratista
respecto del Proyecto y las
transacciones contempladas
bajo el presente Contrato son y
han sido conducidas (dentro de
los cinco (5) años precedentes)
en cumplimiento con las Leyes
Anti-Lavado de Activos y no se
encuentra pendiente ninguna
acción, demanda o proceso ante
cualquier Autoridad
Gubernamental o tribunal
arbitral que involucre al
Contratista respecto de Leyes
Anti-Lavado de Activos
relacionadas al Proyecto y las
transacciones contempladas
bajo el presente Contrato y, a su
leal saber y entender, ninguna
acción, demanda o proceso
similar está siendo actualmente
iniciada.
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30. Environ The Contractor is not Subject to the review and Subject to the review and Subject to review by the
mental required to comply with comment of the Lenders’ comments of the Lenders and comments by the
and any specific E&S consultant and E&S Independent Engineer. E&S Consultant as to whether
Social environmental and social teams, particularly in light of contractors, including the
Require requirements. the Lenders’ understanding The Sponsor agree to Contractor, are also in a
ments that the Project may qualify include the obligation of the position to comply with the
as a category “A” project Contractor and Equator Principles and other
(N/A) under the Equator Principles. Subcontractors to follow the E&S Requirements.
E&S requirements approved
The Lenders would expect by the Peruvian authorities. Based on the E&S
the Contractor’s E&S Consultant’s input and review
obligations to be consistent by the Lenders’ E&S teams,
with the Owner’s additional requirements
corresponding obligations regarding E&S matters
under the finance applicable to the Contractor
documents. may need to be imposed.
31. Performa The Contractor does not Independent Engineer to Please refer to our comments Please note that this is a For discussion.
nce provide any performance comment; the Lenders have to item 10. different issue than item 10
Guarante guarantees subject to the seen similar contracts above.
es payment of penalties. structured both with and
without performance The need or advisability of
(N/A) guarantees. guaranteed performance
levels subject to the payment
of penalties remains subject to
review by the Independent
Engineer.
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32. Intellectu The EPC Contract does The Lenders previously The Sponsors would agree to The Lenders reiterate their
al not contain a grant of any proposed a standard the intellectual property previous comments. In particular
Property intellectual property intellectual property provision proposed by the the license should extend to third
rights. provision which was not Lenders subject to the parties so that operators, Lender
(N/A) accepted by the Owner. The following change being designees, etc. are covered.
Lenders ask that the Owner made to the wording of the
reconsider the Lenders’ fourth paragraph of such
request. proposal:
“(…)
El Contratista concederá
una licencia mundial para el
Proyecto no exclusiva,
irrevocable y libre de cargas
al Cliente o a cualquier
tercero que el Cliente
autorice para el uso o copia
o modificación de dicha
información que permita al
Cliente utilizarla para
completar, mantener,
reparar las Obras y operar
la Línea Eléctrica. (…)”
33. Survival The EPC Contract does A standard survival The Sponsors propose to The provisions relating to
not contain a survival provision should be include a survival provision warranties and intellectual
(N/A) provision. included, as certain with the following text: property should also survive the
provisions will need to termination of the EPC Contract.
survive beyond any “Sin perjuicio de cualquier
termination of the EPC disposición en sentido
Contract, including contrario contenida en el
indemnities, governing law Contrato, las estipulaciones
and dispute resolution, etc. previstas en las Secciones
12.4, 17 y 19 sobrevivirán a
la terminación del Contrato
de conformidad con lo
previsto en la Cláusula
Décimo Sexta, quedando
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vigentes hasta el
vencimiento del plazo de
prescripción más largo
establecido por las Leyes
Aplicables.”
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